The White House is moving up the March 1 deadline for the CLARITY Act, but discussions are stalled on stablecoin rewards, which banks see as a threat to deposits and which crypto companies see as essential to competition and growth. The final compromise will likely decide the degree of yield-based competition between stablecoins and traditional banks.
The CLARITY Act has been a long time coming, with some industry experts now saying the White House is setting March 1 as the deadline for the two sides to reach a unanimous agreement.
On February 10, the White House hosted a meeting on stablecoin performance, one of the most controversial elements of the bill, bringing together representatives from the banking sector and the cryptocurrency industry. According to the testimonies of those present on site, the meeting was “productive”, but no compromise has yet been found.
Coinbase CEO Brian Armstrong has become one of the most prominent critics of the Senate plan, raising concerns that the legislation could amount to a de facto ban on tokenized stocks and impose restrictions on decentralized finance (DeFi) that the crypto community views as undermining financial privacy. Armstrong is not alone in his opposition, as broader sentiment in the crypto community has not been as supportive of the bill either.
Another key caveat is who controls the digital dollar and whether U.S.-based crypto companies can compete with traditional banks and foreign jurisdictions offering more flexible frameworks.
Why are stable rewards important?
Stablecoin rewards work similarly to interest offered by traditional banks, typically generated by income from government bonds or loans.
According to Joshua Chu, lawyer, speaker and co-chairman of the Hong Kong Web3 Association, stablecoin rewards have become a critical part of liquidity and user retention for many exchanges today. They compete with traditional savings and DeFi, forming a source of income.
Coinbase reported $355 million in stable revenue in the third quarter of 2025 alone, representing 47% of the revenue generated by its Subscriptions and Services division. This revenue primarily comes from interest earned on USDC balances held on the platform.
“Stablecoin rewards themselves are not the primary profit driver, but they are a key mechanism for attracting and retaining customers, encouraging users to hold larger stablecoin balances, which in turn generates reserve-based revenue,” said Nic Puckrin, digital asset analyst and co-founder of Coin Bureau.
However, Eli Cohen, general counsel at Centrifuge, argued that the problem may be more concentrated than it appears.
“I think this is primarily an issue with Coinbase. I don’t know of any other exchanges where this is a significant part of their business model.”
Cohen also suggested that the market impact of restricting stablecoin rewards would depend heavily on the final legislative text. If a compromise allowing for activity-based returns, such as rewards tied to investing in real-world tokenized asset (RWA) products, is included in the final bill, he does not expect significant disruption. In this scenario, he said, users could move from a stablecoin holding model to a stablecoin investment model, similar to brokerage money transfers to money market funds.
Financial stability or competitive protection?
The disagreement over stable rewards is rooted in deeper concerns about deposit flight and the stability of the financial system.
Daniel Bara, director of the Olympus association, highlighted the modeling of large financial institutions. The Federal Reserve released an analysis in December modeling up to $400 billion in loan contraction amid moderate stablecoin adoption, while Standard Chartered projects around $500 billion will leave developed market banks by 2028.
These projections are often cited by banks as evidence of systemic risk. Bara phrased the question differently.
“What banks describe as a threat to financial stability also looks like giving consumers access to competitive returns on their own money for the first time in decades. Lawmakers must balance the two concerns, and how they draw that line will shape financial competition for the next decade.”
Other experts also acknowledged that stable coin yields could be seen as competitive pressure on traditional banks.
“The Clarity Act attempts to preserve the status quo for traditional banks while supporting the burgeoning digital asset ecosystem…Stablecoin yields in particular are seen as a threat to traditional bank deposits, so limiting them narrows the competitive gap between banks and crypto exchanges,” noted Coin Bureau’s Puckrin.
Chu, of the Hong Kong Web3 Association, went further, saying that limiting deposit-like returns could effectively strengthen the traditional bank deposit model.
Winners and losers
If the CLARITY Act passes in its current form, experts say the immediate impact would not be evenly distributed.
“At this stage, the project benefits banks the most, because it protects them from competition on stable returns,” Puckrin said. While stablecoin issuers could benefit from regulatory clarity, platforms heavily reliant on rewards could face short-term pressures.
Chu also argued that traditional banks would benefit domestically from reduced competition. Internationally, however, he suggested that jurisdictions with more innovation-friendly frameworks could attract capital and business if U.S. rules are seen as too restrictive.
Bara, of the Olympus Association, described the broader issues as a battle for control of dollar-denominated savings, noting that even when legislation restricts direct output, economic incentives do not disappear; they adapt.
A necessary step, but on whose conditions?
Despite disagreements over stable rewards, experts have consistently emphasized the importance of regulatory clarity.
“The Clarity Act is extremely important for the digital assets industry as a whole, as it would close the door on the regulatory uncertainty that has historically held back innovation,” Puckrin said, warning that waiting too long could be as risky as making excessive concessions.
Chu noted that the debate around the CLARITY Act may ultimately be about who controls stablecoins. He highlighted the risks of US “tunnel vision” that ignores global competition, including overseas interest-bearing central bank digital currencies (CBDCs), in a struggle between protecting existing rails and building truly competitive digital finance.
However, other experts noted that the debate was more about the composability and utility of stablecoins.
“It is difficult for lawmakers and their staff to try to fit new financial modes into existing frameworks. This has been a problem for crypto markets in general since their inception and will continue to be a problem long after the problems with the market structure bill have been resolved,” Cohen said.
The final compromise could determine whether U.S. policy primarily preserves existing banking structures or meaningfully integrates crypto-native competition into the financial system.
Iliana Mavrou
Iliana has been covering the crypto and fintech industry since the NFT boom of 2021. Throughout her career, Iliana has reported on key crypto events, including the Ethereum merger, the FTX scandal, and regulatory developments. Before joining Defi Rate in 2026, she wrote for a number of publications in the crypto space, with bylines on CryptoNews, Techopedia, and Capital.com. Iliana holds a bachelor’s degree in journalism from City St. George’s, University of London, and a master’s degree in communications from the University of Gothenburg. When she’s not working, Iliana enjoys taking photos and experimenting with crochet projects, although she tends to spend much of her free time on crypto Twitter looking for scoops.
