CLARITY Act Delay Leaves Stablecoin Rewards Loophole Open, Sparking $6.6T Banking Risk Debate

The CLARITY Act, a cornerstone of President Donald Trump’s pro-crypto agenda, has stalled in Senate Banking Committee deliberations, delaying a suite of market regulations. While the bill’s fate remains uncertain—Galaxy Research estimates a 50-50 chance of passage this year—its delay may inadvertently create a real-world test for one of crypto’s most contentious issues: stablecoin rewards.

Why the CLARITY Act Matters

The stalled legislation spans critical areas, including token classification, exchange and broker-dealer registration, software carveouts, and decentralized finance (DeFi) provisions. However, the most heated debate centers on stablecoin yield restrictions, a provision that has drawn sharp criticism from Wall Street and regulators alike.

The Stablecoin Rewards Dispute

The GENIUS Act, a companion bill, explicitly prohibits stablecoin issuers from paying interest or yield solely for holding payment stablecoins. Yet the broader question remains: Can exchanges and third parties offer cash-back rewards, referral bonuses, or promotional yields without violating these rules?

Both the OCC’s March proposal and the FDIC’s April proposal extended anti-evasion presumptions to affiliate and third-party arrangements, narrowing the scope of permissible rewards. However, these remain proposed rules, leaving the practical boundaries of compliance undefined.

Wall Street’s $6.6 Trillion Warning

Banks argue that exchange-funded stablecoin rewards pose an existential threat to their competitiveness. The American Bankers Association (ABA) warned in a community bank letter that up to $6.6 trillion in deposits could be at risk if stablecoin yields lure savers away from traditional banking. Standard Chartered offered a more conservative estimate, forecasting up to $500 billion in deposit outflows to stablecoins by the end of 2028, with regional banks facing the highest exposure.

The crux of the argument: Stablecoin rewards make digital assets functionally competitive with bank deposits—without the reserve requirements, capital rules, or deposit insurance costs that banks must bear.

White House Rebuttal: Minimal Economic Impact

The White House Council of Economic Advisers pushed back in an April report, arguing that eliminating stablecoin yield would only increase bank lending by about $2.1 billion (0.02%) while imposing an $800 million net welfare cost.

As of April 27, the stablecoin market stood at $320 billion, representing roughly 1.66% of the $19.1 trillion US commercial bank deposit base. Even if the market grew to $500 billion—with every incremental dollar siphoned from bank deposits—the displacement would amount to just 0.96% of current deposits.

This suggests that while stablecoins may test community banks’ pricing power, they are unlikely to destabilize the broader financial system.

What Happens If CLARITY Stalls?

If the CLARITY Act remains in limbo and agency rulemaking fails to close the rewards loophole, exchanges could continue operating in a regulatory gray area. This scenario would allow the market to answer critical questions before Congress acts:

• Will stablecoin rewards reshape deposit competition?
• Can banks adapt to the new landscape?
• Will regulators intervene before systemic risks emerge?

For now, the debate rages on—with billions in deposits, trillions in market cap, and the future of crypto regulation hanging in the balance.

“The rewards lane remains unsettled, and that uncertainty may be the most telling experiment of all.”