The CLARITY Act negotiations have hit a wall, with banks digging in against stablecoin yield payments and derailing what could have been a major win for crypto regulation. Despite White House pressure over the weekend, sources confirm the talks are nowhere near resolution, leaving the bill stuck in Senate limbo. This isn’t just a hiccup; it’s a fundamental clash between traditional finance and crypto innovation, where banks see yield-bearing stablecoins as a threat to their deposit monopoly.
Bipartisan support got the bill through the House last year, but now the Senate Banking Committee is the battleground. Crypto lobbyists and banking reps can’t agree on core issues like whether stablecoins should pay interest. As related DeFi oversight debates heat up, the stalemate risks pushing comprehensive market structure reforms into election-year chaos.
The CLARITY Act’s Rocky Path to Nowhere
The CLARITY Act promised to carve clear lines between SEC securities and CFTC commodities, plus set rules for exchanges and custodians. Passed by the House in July 2025 with unusual bipartisanship, it landed in the Senate with high hopes. But months later, it’s mired in committee with no markup or floor vote in sight.
Banking sources, speaking through reporters like Eleanor Terrett, describe draft language as existing but the sides as “not close.” Crypto advocates defend the White House’s push, while banks counter that talks continue. This fragility mirrors broader tensions in crypto firms chasing bank charters, where regulatory overlap breeds conflict.
The real drag? A pivot in early 2026 to stablecoin specifics, turning a jurisdictional bill into a yield war. Without resolution, the entire framework teeters.
House Victory Meets Senate Stonewall
The House passage was a rare moment of unity, defining digital assets’ regulatory homes and mandating registrations. It aimed to end the SEC-CFTC turf war that’s plagued projects for years. Yet in the Senate, progress halted abruptly post-referral.
No committee markup means no amendments, no debates, no path forward. Sources indicate draft text circulates privately, but consensus eludes. This echoes lawmaker enthusiasm for crypto bills clashing with institutional resistance.
Austin Campbell, a finance expert, warns banks are cornering themselves by stalling, potentially facing broader Genius Act language. Substantiated by onchain data and policy trackers, this risks entrenching uncertainty longer-term.
White House Mediates, But Sides Entrench
Recent White House meetings sought a pre-March yield deal, per DC insiders. Banks like the American Bankers Association deny collapse claims, insisting input flows. Crypto Twitter erupted in defense of negotiators like Patrick Witt.
Paul Barron’s sources paint banks as holding the bill hostage over competition fears. With trillions already lost to fintech shifts, their stance smacks of protectionism. This dynamic parallels stablecoin market dominance fights.
Outcome hinges on compromise; without it, election politics loom large.
Stablecoin Yield: The Poison Pill at the Center
Yield on stablecoins emerged as the flashpoint, shifting focus from agency boundaries to economic control. Senate drafts propose banning interest-like payments, arguing they mimic unregulated deposits. Banks back this hard, viewing it as existential competition.
Crypto counters that responsible yield fosters innovation without risk. Coinbase’s Brian Armstrong publicly slammed restrictions, pulling support for the Senate rewrite. This feud now endangers the bill’s market structure core, as seen in DeFi ad bans and oversight expansions.
Unresolved, it blocks everything else. Negotiators must settle economics before jurisdiction.
Banks’ Argument: Deposits in Disguise
Banks claim yield-bearing stablecoins evade deposit insurance and oversight, posing systemic risks. They liken them to shadow banking, demanding tight limits. Trade groups push for SEC power grabs and disclosures in amendments.
BeInCrypto noted Coinbase’s opposition to added DeFi rules. Data from stablecoin volumes shows trillions in circulation, amplifying stakes. Banks’ fear is credible given fintech disruptions, but critics call it anti-competitive.
This mirrors DeFi exploit worries, where regulation lags innovation.
Crypto’s Rebuttal: Innovation Killer
Crypto firms argue yield rewards liquidity providers responsibly, boosting adoption. Banning it stifles U.S. leadership, pushing activity offshore. Armstrong’s stance highlights how surveillance risks compound the issue.
Onchain metrics show yield products driving TVL growth. Without them, stablecoins lose edge over fiat. Ties to whale accumulation trends underscore demand.
Resolution requires hybrid models balancing safety and growth.
Unresolved Flashpoints Beyond Yield
Four pillars still divide: stablecoin rewards as interest, exchange incentive caps, SEC-CFTC lines, DeFi developer duties. Yield dominates, but spillover stalls all. Banks want broad SEC sway; crypto seeks CFTC freedom.
Senate amendments expanded disclosures and DeFi scope, irking players like Coinbase. This comprehensive rewrite risks alienating bipartisan backers. Context from charter pursuits shows intertwined fates.
Markup awaits these fixes; delays breed volatility.
SEC vs CFTC Boundaries
Core to CLARITY: when assets are securities vs commodities. House clarity now muddied by Senate tweaks favoring SEC. Crypto fears overreach stifling tokens.
Examples abound of SEC lawsuits; bill aimed to preempt. Stalemate prolongs gray zones, hurting ETF inflows and prices.
Expert consensus leans toward defined tests, but politics intervene.
DeFi and Exchange Rules
New duties for developers and tighter exchange incentives loom. Banks push surveillance; crypto resists. Ties to RWA tokenization heighten urgency.
Without rules, innovation chokes. Balanced oversight could unlock trillions.
What’s Next for the CLARITY Act
Senate Banking markup is pivotal, but undated. March breakthroughs could lead to votes; drags invite politics. Bill lives, but yield truce decides fate.
Congress wants rules; question is control. Banks vs crypto defines 2026 regulation. Watch for White House nudges amid ETF inflow surges.
Stalemate costs clarity; resolution unlocks markets.
