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Two Senate committees passed versions of the Clarity Act, but the bill failed a cloture vote on the Senate floor and left the question of stablecoin yield unresolved. Stablecoin yield became a sticking point in the U.S. Senate because regional and community banks fear that interest-paying stablecoins would draw deposits away from low-yield savings accounts. Until lawmakers or regulators act, stablecoin issuers can keep offering interest the way they did before.
Mark Palmer, StoneX Financial Inc. Research Analyst, covers the fintech and digital asset sectors and the policy shifts that move them. That coverage gives insight into what is driving the stablecoin yield debate, from the Clarity Act's stall in the Senate to the deposit concerns of regional and community banks.
Stablecoin yield sits alongside ethics provisions among the issues holding up the Clarity Act in the U.S. Senate. The bill passed the House of Representatives, then cleared the Senate Banking Committee and the Senate Agriculture Committee in separate versions. On the Senate floor, Palmer says, the bill "was hung up because the Senate did not vote in favor of cloture to move to a full floor consideration and vote". Senate Democrats have pressed on ethics provisions, including ones that would address the activities of the Trump family, as well as on interest paid on stablecoins. As a result, the Clarity Act remains stuck without a final floor vote.
The GENIUS Act, already signed into law, gives payment stablecoins a federal framework. Specifically, the GENIUS Act set rules for stablecoin issuers and for the "reserves that needed to be established by those issuers". The GENIUS Act did not address a broad array of other issues, such as how crypto trading platforms are regulated. The Clarity Act was meant to fill that gap with a broader crypto market structure and to clarify the roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission, which pulled stablecoin yield into the same Senate fight.
"That is a big issue in the U.S. for many of the regional and community banks who are concerned that if stablecoins are offering yield, that is going to look like an attractive alternative to the very low yields that they're offering on their savings accounts," Palmer says. Regional and community banks in the U.S. oppose interest on stablecoins because they fear depositors would move money out of savings accounts and into stablecoins. The worst case for those banks is a mass exodus of funds out of the banking system. That fear may or may not prove accurate, yet it carries enough weight in the Senate to hold up the Clarity Act. The stablecoin yield question is therefore tied to the fate of the wider bill.
The Clarity Act's failure to pass has given U.S. stablecoin issuers a reprieve, allowing them to keep paying interest to holders. According to Palmer, "now, they can continue to offer interest the way that they had before". The reprieve has a limit, lasting only until a regulator moves to stop the practice. Meanwhile, the Securities and Exchange Commission and, to a lesser extent, the Commodity Futures Trading Commission have started addressing crypto questions on their own since the Clarity Act stalled. As things stand, stablecoin issuers operate on terms that a single regulatory decision could change.
Broader U.S. rules on stablecoin yield depend on what the Senate does after the midterm elections, with the full Clarity Act still technically alive but stalled. A lame-duck session follows, and attention in Washington then shifts to the next presidential election. Smaller pieces of legislation offer a narrower route, and as Palmer puts it, "what we could see is some form of mini bills that are taking on parts of the Clarity Act where there is consensus among both parties". Stablecoin yield remains a sticking point, which places it outside those areas of consensus for now.
--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Mark Palmer, StoneX Financial Inc. Research Analyst
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Bank and crypto regulation rides on which party controls Congress after the U.S. midterm elections. A split between a Democratic House and a Republican Senate points to gridlock that keeps tighter rules on banks, crypto and tech stocks on hold.
Bank and crypto regulation rides on which party controls Congress after the U.S. midterm elections. A split between a Democratic House and a Republican Senate points to gridlock that keeps tighter rules on banks, crypto and tech stocks on hold.
Stablecoin yield has become one of the issues holding up the Clarity Act in the U.S. Senate. Regional and community banks fear interest-paying stablecoins would draw deposits away, while issuers keep paying interest as the bill stalls.
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