If crypto rewards survive CLARITY Act banks are likely to rapidly build their own branded digital dollars

Washington’s stablecoin stalemate is hardening right into a struggle that banks acknowledge instantly as a deposit difficulty.

The dispute is now not centered on whether or not dollar-linked tokens ought to exist. It facilities on whether or not they need to be handled as deposits, particularly if shoppers can earn interest-like rewards merely for holding them.

A latest White House meeting geared toward breaking a impasse between banking and crypto commerce teams ended with out settlement, with stablecoin curiosity and rewards nonetheless the central fault line.

The timing is just not incidental. Stablecoins have grown past a distinct segment plumbing layer for crypto buying and selling and cross-venue settlement.

Total stablecoin provide hit a contemporary high in mid-January, peaking at $311.332 billion, primarily based on DeFiLlama data.

At that scale, the coverage query ceases to be theoretical and turns into a query of the place the most secure, stickiest “money” steadiness sits within the monetary system and who advantages from it.

Why banks see stablecoins as deposit competitors

Banks care about stablecoins as a result of the dominant mannequin reroutes “deposit-like” cash away from financial institution steadiness sheets and into short-term US authorities debt.

Deposits are low-cost funding for banks. They assist mortgage books and assist cushion margins. Stablecoin reserves, against this, are sometimes held in money and short-term Treasuries, which shifts the system’s resting cash away from deposit funding and towards sovereign funding.

Essentially, these new belongings change who earns, who intermediates, and who controls distribution.

That turns into politically explosive when the product begins competing on yield. If stablecoins are strictly non-interest-bearing, they seem like a settlement software, a funds know-how that competes on velocity, uptime, and availability.

However, if stablecoins can ship yield, both instantly or by way of platform rewards that really feel like curiosity, they begin to resemble a financial savings product.

That is the place banks understand a direct menace to their deposit franchise, significantly for regional lenders that rely closely on retail funding.

Standard Chartered lately quantified the perceived threat, warning that stablecoins might withdraw approximately $500 billion in deposits from US banks by the tip of 2028, with regional lenders most uncovered.

The estimate is much less essential as a forecast than as a sign of how banks and their regulators are modeling the subsequent part.

In that framing, a crypto platform turns into the front-end “money account,” whereas banks get pushed into the background, or lose balances outright.

GENIUS and CLARITY are now tangled within the rewards struggle

Notably, the US already has a stablecoin regulation on the books, and it’s central to the present dispute.

President Donald Trump signed the GENIUS Act in July 2025, framing it as a way to convey stablecoins inside a regulated perimeter whereas supporting demand for US debt by way of reserve necessities.

However, the regulation’s implementation stays forward-dated, with the Treasury Secretary Scott Bessent confirming that the laws could possibly be applied by July this yr.

That runway is one motive the yield dispute has migrated into the market-structure push now grouped under CLARITY.

Banks argue that even when stablecoin issuers are constrained, third events (exchanges, brokerages, fintechs) can nonetheless supply incentives that seem to be curiosity, drawing clients away from insured deposits.

Due to this, they’ve outlined a broad prohibition on stablecoin yield, stating that no individual might present any type of monetary or non-financial consideration to a fee stablecoin holder in reference to the holder’s buy, use, possession, possession, custody, holding, or retention of a fee stablecoin.

They add that any exemptions ought to be extraordinarily restricted to keep away from undermining the prohibition or driving deposit flight that will undercut Main Street lending.

However, crypto companies counter that rewards are a aggressive necessity, and that banning them locks in financial institution energy by limiting how new entrants can compete for balances.

The strain has change into express sufficient to sluggish legislative momentum.

Last month, Coinbase CEO Brian Armstrong mentioned the company could not support the bill in its present kind, citing constraints on stablecoin rewards amongst different points, a transfer that helped delay Senate Banking Committee motion.

Nonetheless, not everybody in crypto agrees that the 2 debates ought to be fused.

Mike Belshe, BitGo’s CEO, said each side ought to cease rehashing GENIUS as a result of, in his view, that struggle is settled, and anybody who desires modifications ought to pursue an modification.

He mentioned the market-structure effort shouldn’t be held up by a separate dispute over stablecoin yield, including, “Get CLARITY finished.”

That break up is now shaping how the sector plans for 2026. It can also be shaping how banks and crypto platforms place themselves for guidelines that may decide who holds the patron’s default greenback steadiness.

Three paths for the sector, and three totally different units of winners

Considering the above, the stablecoin deadlock may be resolved in ways in which reshape enterprise fashions throughout crypto and finance.

In the primary situation, the no-yield clampdown (bank-friendly). If Congress or regulators successfully limit passive “hold-to-earn” rewards, stablecoins will skew towards funds and settlement quite than financial savings.

That would likely speed up adoption amongst incumbents searching for stablecoin rails with out deposit competitors.

Notably, Visa’s push is an early sign. It reported greater than $3.5 billion in annualized stablecoin settlement quantity as of Nov. 30, 2025, and expanded USDC settlement to US institutions in December.

In this world, stablecoins develop as a result of they scale back friction and enhance settlement, not as a result of they pay shoppers to maintain.

In the second situation, banks and crypto companies can attain a compromise.

Here, US lawmakers might permit rewards tied to exercise (spending, transfers, card-like interchange) whereas proscribing pure duration-based curiosity.

That would protect shopper incentives however make compliance and disclosures the moat, favoring massive platforms with scale.

The likely second-order impact is a migration of yield into wrappers, with returns delivered across the stablecoin by way of constructions resembling tokenized money-market entry, sweeps, and different merchandise that may be framed as distinct from a fee stablecoin steadiness.

Lastly, the established order might persist due to ongoing delays between the banks and the crypto companies.

If the deadlock drags by way of 2026, rewards persist lengthy sufficient to normalize stablecoin “money accounts.” That will increase the probability that the deposit-displacement thesis is directionally true, particularly if fee differentials are significant to shoppers.

It additionally will increase the danger of a sharper coverage backlash later, a whiplash second that arrives after distribution has already shifted and the political optics harden round deposit flight.

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