Banks pushed Congress to kill stablecoin yield with CLARITY Act – Coinbase may have found the loophole

For conventional US banks, the CLARITY Act was meant as a firewall that successfully barred crypto firms from providing “passive” curiosity on stablecoins.

The laws aimed to stop a catastrophic deposit flight wherein on a regular basis checking account balances drain from the banking system into high-yield crypto exchanges.

But as lawmakers put together to finalize the framework, Coinbase seems to be quietly structuring a loophole that depends on complicated monetary engineering to maintain the profitable yield flowing.

The key lies in a important semantic distinction inside Section 404 of the proposed laws. While the CLARITY Act explicitly outlaws savings-account-style curiosity on stablecoins, it preserves “activity-based” rewards.

Enter Ethena, an artificial greenback protocol that generates returns by means of an energetic, delta-neutral foundation commerce that entails shorting crypto perpetual futures whereas holding the spot asset.

By integrating with Ethena, Coinbase may theoretically route idle USDC into this technique.

If profitable, the alternate may cross alongside the income of an energetic buying and selling technique and doubtlessly supply large yields on digital {dollars} proper underneath regulators’ noses whereas deeply irritating a conventional banking sector caught providing negligible charges.

The legislative wall known as CLARITY Act

The CLARITY Act, a sweeping US market-structure bill designed to outline how crypto belongings and intermediaries function underneath federal laws, has been a legislative battleground.

At the middle of the dispute that dragged out the Senate Banking Committee’s course of is the query of stablecoin rewards.

The newest compromise is primarily captured in Section 404, which was born from the Tillis-Alsobrooks modification. The provision attracts a tough regulatory line that the business negotiated for months.

On one aspect is passive yield: merely holding a stablecoin stability and receiving periodic curiosity, which is structurally similar to a financial institution financial savings account. This is explicitly banned.

On the different aspect are activity-based rewards: incentives tied to precise buyer exercise, corresponding to funds, transactions, platform utilization, and buying and selling. These are permitted.

The financial institution foyer pushed onerous for these restrictions. Banking executives contend that corporations providing bank-like merchandise ought to face comparable oversight, reserve, and capital obligations.

If crypto platforms may freely pay savings-account charges on stablecoin balances with out FDIC insurance coverage necessities, they may simply siphon depositor capital at the expense of the regulated banking system.

JPMorgan Chase CEO Jamie Dimon lately voiced this actual frustration. In a current interview, Dimon criticized Coinbase CEO Brian Armstrong and warned that the CLARITY Act may fail if conventional banking considerations aren’t addressed.

Asked if he was happy with the present draft of the invoice, Dimon was blunt, saying:

“No, as a result of it permits them to successfully pay curiosity on deposits, stablecoins or one thing like that, with out safety that they need to have. The banks won’t settle for it that approach…”

For the laws to turn into regulation, representatives from the Senate Banking and Agriculture committees should merge their superior payments earlier than it clears the full Senate, the House, and lands on President Donald Trump’s desk. But whereas Washington debates, the crypto business is already constructing round the new guidelines.

Coinbase’s Ethena workaround

Coinbase depends closely on stablecoins. In Q1 2026, the alternate reported $305.4 million in stablecoin revenue, making up roughly 52% of its subscription and providers income.

The agency additionally said that it held a mean of about $19 billion in USDC throughout its merchandise, accounting for greater than 25% of the whole USDC in circulation.

To defend this important income engine underneath Section 404, Coinbase wanted a product wherein yield is tied to specific exercise relatively than passive holding. Its new partnership with Ethena completely threads this needle.

Ethena said:

“Ethena and Coinbase have partnered to develop on-chain finance and financial savings merchandise for his or her 100 m+ person base, with the first progress initiative launching subsequent week.”

Alongside the integration, Coinbase Ventures made its first funding into Ethena on the open market.

Coinbase additionally confirmed its expanded position, noting it is going to help safety and operations throughout greater than $5 billion in Ethena belongings. Coinbase now serves as Ethena’s main custodian, pockets supplier, and perpetuals venue.

Because Ethena generates yield by means of complicated buying and selling actions, Coinbase can route yield-seeking USDC customers into actual borrow demand and energetic market methods.

Guy Young, Ethena’s Founder, explicitly acknowledged the regulatory tailwinds, saying:

“Excited to accomplice with Coinbase for the first time to help their greenback financial savings merchandise…Given the evolving nature of the Clarity Act, we anticipate additional potential tailwinds for onchain native merchandise like USDe from idle balances on exchanges, and Ethena is properly positioned to help this transition.”

Yan Liberman, a managing accomplice at Delphi Ventures, highlighted precisely how profitable this structural shift might be for each side. He stated:

“Reading between the strains for the upcoming product launch referenced. Coinbase x Ethena is bullish as a result of it will possibly flip Coinbase’s ~$19B USDC base, with an implied ~$13B of reward-earning balances, right into a funding rail for Ethena. If sUSDe yields clear baseline USDC charges, Coinbase can supply higher USDC lending yields, loopers can lever the unfold, and Ethena will get deeper/cheaper funding than native DeFi alone. Aave mechanics, Coinbase distribution.”

Liberman added that the CLARITY Act makes this pivot extremely invaluable. If lawmakers prohibit passive USDC rewards, Ethena provides Coinbase a approach to route customers into actual borrow demand relatively than merely paying them for holding USDC.

He added:

“Coinbase wants merchandise the place yield is tied to specific exercise: lending, collateral, liquidity, or platform utilization. Ethena provides them a approach to route yield-seeking USDC customers into actual borrow demand, relatively than simply paying rewards for holding USDC.”

The new “Coinbase downside” for banks

While banks would possibly really feel protected by Section 404’s ban on passive curiosity, the Ethena loophole presents a brand new and fast risk.

Stablecoins have outgrown their origins as a distinct segment settlement layer. The whole stablecoin market sits at roughly $320 billion, with USDC at about $76 billion and Ethena’s USDe round $4.5 billion.

Because Circle backs USDC with extremely liquid money and cash-equivalent belongings with month-to-month attestations, Coinbase’s technique makes use of USDC as the trusted settlement asset, whereas Ethena supplies the yield-bearing synthetic-dollar layer.

Admittedly, a direct systemic financial institution run is unlikely. US industrial financial institution deposits stood at roughly $19.3 trillion in late May 2026, and money-market fund belongings sat at $7.78 trillion. Even if Coinbase transformed its whole $19 billion USDC stability, it will be a drop in the bucket in contrast to the broader banking system.

However, the actual hazard to banks is marginal pricing strain.

If cell, yield-sensitive retail prospects and institutional treasuries notice they’ll seamlessly entry ~3.8% APY by means of an activity-based Ethena technique inside a Coinbase app, they are going to inevitably transfer their idle money.

To stem the outflow, conventional banks may be compelled to elevate their very own traditionally low deposit charges, which straight eats into their web curiosity margins. Notably, US financial savings accounts yield simply 0.38%, and curiosity checking accounts scrape the backside at 0.07%.

Moreover, Tom Wan, head of analysis at Entropy Advisors, pointed out that the Coinbase and Ethena integration might be the starting of an institutional synergy that bypasses conventional banking solely.

Wan notes Ethena can leverage institutional lending through Coinbase Asset Management, make the most of Coinbase Custody, and use USDC as a liquid stablecoin backing. In the future, Coinbase may turn into a main foundation commerce venue and allocate backing belongings to lending protocols like Aave on Base to develop USDe as a dominant financial savings product.

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