The White House continues to express disappointment with the banking lobby’s hard line against the proposed crypto market structure bill, the CLARITY Act.
The two sectors, the crypto and banking sectors, have failed to reach an amicable agreement on stablecoin rewards. The issue of stable rewards has stalled the bill’s progress since earlier this year.
At a recent bankers’ summit in Washington, the industry maintained a tough stance against any compromise on the bill, drawing criticism from the White House.
In response, Trump’s crypto advisor, Patrick Witt, said,
“The CLARITY Act must remain pro-innovation legislation. Attempts to hijack the legislative process and turn it into an anti-competitive bill are shameful.”
Bankers’ plea
Witt’s statement follows Rob Nichols, president of the American Bankers Association, an advocacy group, who called the current dispute “anti-competitive.”
At the Washington summit, Nichols warned,
“Our industry welcomes competition and innovation… what we don’t support is an uneven playing field.”
Since last year, the traditional banking industry has argued that stablecoin rewards would lead to a flight of deposits and harm the financial system.
The industry argues that the US stablecoin law, the GENIUS Act, created a loophole that allows intermediaries to share yield with users, circumventing the ban on direct rewards imposed on issuers.
To alleviate this problem, banks want the ban to be extended to intermediaries as well. This would mean amending the GENIUS Act or imposing the ban in the CLARITY Act.
However, stablecoin issuers view this as a threat to their business model. In fact, beyond disrupting their model, proponents view stablecoin yield as a national security issue, citing China’s push into the sector with rewards for the digital yuan.
Proposed compromise with the CLARITY law
The senators attempted to bring the two sides to a compromise on the issue.
At the banking summit, Maryland Democratic Senator Angela Alsobrooks stressed that each faction will be “just a little unhappy” but will help push for clear rules for the sector.
“We absolutely need to have these protections to prevent deposits from leaking, but we will probably have to make compromises.”
Congressional Research Service (CRS) estimates that stablecoin yield could reduce bank lending from $65 billion to $1.26 trillion as the GENIUS Act prohibits lending of stablecoin reserves. The CRS urged banks to offer higher interest rates to depositors to remain competitive.
The compromise sought by lawmakers is to restrict the types of stablecoin activities that crypto platforms can allow to receive stablecoin rewards.
But the opposition to the banks has been facing a series of criticisms from the White House in recent days. As such, the path forward for the CLARITY Act remains uncertain unless relevant stakeholders resolve the issue of stable coin yield.
Final Summary
- The White House criticized banks for presenting the CLARITY Act as an “anti-competitive” bill.
- The banking industry reiterated its concerns about stable coin yields at a recent meeting.
