White House sets February deadline to settle $6.6 trillion fight between Coinbase and banks
The White House’s end-of-February deadline for banks and crypto companies to resolve the “stablecoin yield” debate exposes a structural fault line that was by no means going to keep buried.
This is not a pace bump on the street to crypto-friendly regulation. Instead, it is a core collision that occurs when digital {dollars} scale massive sufficient to threaten the enterprise mannequin of deposit-taking itself.
According to a number of stories, the White House convened banks and crypto representatives with an specific mandate: discover widespread floor on whether or not platforms can supply rewards on stablecoin holdings, or threat broader market construction laws collapsing in 2026.
Reuters confirmed the summit’s deal with “curiosity and different rewards,” framing it as an try to unstick a invoice already delayed by this actual conflict.
The stakes are binary.
If Coinbase, banks, and different stakeholders attain consensus this month, the CLARITY Act advances. However, virtually actually in a kind that neither aspect presently acknowledges.
If they do not, the broader digital asset market construction package deal dies for the 12 months, and crypto’s regulatory momentum fractures into agency-by-agency enforcement reasonably than complete laws.
What’s truly being fought over
The technical dispute facilities on whether or not exchanges, wallets, or different intermediaries can cross Treasury yields to customers as “rewards” on stablecoin holdings.
Stablecoin issuers earn yield on reserves, equivalent to primarily short-dated Treasuries and in a single day devices. Yet, beneath the framework Congress designed, issuers themselves can not pay curiosity instantly to holders.
That prohibition was intentional: lawmakers wished to distinguish cost stablecoins from deposit accounts.
Banks argue that permitting exchanges or associates to supply yield-like rewards circumvents that intent.
The American Bankers Association and Bank Policy Institute have urged senators to “shut the loophole,” arguing that any third get together paying rewards tied to stablecoin balances successfully converts a cost instrument right into a financial savings product.
Coinbase and crypto commerce teams counter that Congress intentionally preserved the flexibility for third events to supply lawful rewards.
The Blockchain Association’s letters argue that GENIUS, the stablecoin framework, prohibited issuer curiosity however left room for platforms to design incentive constructions tied to utilization, transactions, or different engagement.
This is not semantic hairsplitting. It’s a distributional fight over who will get to route Treasury yields to shoppers digitally, and whether or not doing so exterior the banking system constitutes unfair competitors or official product innovation.
Why the fight issues now
Stablecoins crossed a threshold the place hypothetical threat grew to become quantifiable publicity.
Total stablecoin market capitalization sits round $305 billion as of early February 2026. That’s massive sufficient for banks to mannequin deposit flight eventualities and massive sufficient for regulators to fear about monetary stability.
Standard Chartered estimated roughly $500 billion in US bank deposit outflows by the tip of 2028, tied to stablecoin adoption, explicitly noting that the trajectory will depend on whether or not third events can supply curiosity.
The Bank Policy Institute cited a Treasury-attributed estimate of up to $6.6 trillion in deposit outflows beneath sure assumptions. This is a high-end stress state of affairs designed for persuasion however reflective of the size banks now see as believable.
The international context tightens the clock.
Hong Kong’s regulator expects to challenge its first stablecoin issuer licenses in March 2026.
The Bank for International Settlements documented three broad global approaches to stablecoin-related yields: full bans, retail bans with institutional carve-outs, and no specific prohibition.
The UK is designing a regime by which systemic cost stablecoin issuers maintain a portion of their backing property unremunerated with the central financial institution, particularly to stop stablecoins from changing into financial savings merchandise.
A deal occurs, CLARITY advances
If consensus emerges by the tip of February, the invoice that strikes ahead won’t resemble the clear House-passed model.
A vital technical element clarifies what “completely different format” seemingly means: the House Digital Asset Market Clarity Act’s Section 404 addresses change registration with the CFTC, not stablecoin rewards.
The controversial “yield Section 404” language exists in Senate Banking drafts, not the House chassis.
So “completely different format” virtually actually means a Senate Banking overlay that bolts a stablecoin inducements title onto the House market-structure framework.
Three drafting pathways map to what stakeholders are already signaling.
The probably compromise is an “activity-based rewards” protected harbor. Senate-side language being mentioned publicly facilities on banning yield paid solely for holding a cost stablecoin whereas permitting rewards tied to exercise: funds, transactions, loyalty packages, and settlement.
The invoice would outline “solely for holding” tightly, prohibiting time-based APY advertising whereas allowing behavioral incentives.
If this model passes, stablecoin rewards turn into a regulated advertising and product-structure engineering train. Expectations are that platforms will shift from “park USDC, earn 4%” to “transact or route funds, earn rebates.”
A second pathway entails a “reserve-at-community-banks” quid professional quo. Reports counsel compromise discussions embrace requiring stablecoin reserves to be held with neighborhood banks.
This is political and industrial coverage: flip stablecoins into a brand new distribution channel for financial institution stability sheets reasonably than an alternative choice to them.
A 3rd possibility splits retail and institutional remedy. A invoice might prohibit retail “yield-like” rewards whereas permitting establishments to obtain charge rebates or settlement incentives, topic to disclosure and capital guidelines.
This tilts stablecoin progress away from shopper financial savings substitution and towards B2B settlement, collateral, and treasury operations, which is exactly the place banks additionally need to compete.
Standard Chartered’s $500 billion deposit outflow state of affairs assumes significant rewards stay obtainable.
If the deal sharply constrains retail rewards, adoption tilts away from “financial savings substitute” and towards “funds rail,” reducing outflow threat relative to the high-end financial institution memos.
| Draft pathway | What it bans | What it permits | What Coinbase sells to customers | What banks get | Who wins / loses | Regulatory implication |
|---|---|---|---|---|---|---|
| Activity-based rewards protected harbor | Rewards paid solely for holding a cost stablecoin; time-based APY advertising; “park-and-earn” framing | Rewards tied to exercise: funds, transactions, loyalty packages, settlement/routing; clearly disclosed platform-funded incentives | “Earn rebates for utilizing stablecoins” (spend/route/pay) reasonably than “earn yield for holding” | Reduced threat of stablecoins behaving like deposit substitutes; clearer boundary between funds vs financial savings | Winners: compliant platforms + payments-focused stablecoins. Losers: passive-yield merchandise and “financial savings wrapper” UX | Forces product-structure engineering + advertising guidelines: definitions, disclosures, audit trails round what counts as “exercise” |
| Reserve-at-community-banks quid professional quo | (Typically) unconstrained rewards with out reserve-placement/partnering situations; reserve constructions that bypass native financial institution channels | Some rewards could stay, however reserves (or a portion) have to be held by way of neighborhood banks / financial institution channels; creates a banking “participation” requirement | “Rewards keep (perhaps), however backed by a extra bank-integrated plumbing” | A direct balance-sheet foothold in stablecoin progress; political cowl by way of “native lending” narrative | Winners: neighborhood banks and issuers/platforms that may operationalize reserve routing. Losers: issuers/platforms designed to reduce financial institution dependence | Turns stablecoins into industrial coverage: codifies which establishments get the reserve float, provides operational compliance and focus/eligibility guidelines |
| Retail vs institutional cut up | Retail-facing yield-like rewards; shopper merchandise that resemble financial savings accounts | Institutional charge rebates / settlement incentives beneath situations (disclosure, threat controls, capital remedy); B2B settlement/collateral use instances | “Retail received’t earn yield for holding; establishments get effectivity rebates” | Retail deposit safety; banks can compete the place they already play: treasury, settlement, collateral | Winners: establishments, market makers, treasury platforms; banks in wholesale rails. Losers: retail exchanges/wallets counting on yield to purchase customers | Accelerates a two-track stablecoin market (retail constrained, institutional permissive), shifting progress towards B2B rails and formal supervisory perimeter |
No deal, CLARITY useless for 2026
If no consensus emerges by the deadline, two issues occur concurrently.
The first is that legislative momentum stalls. Reuters framed the White House summit as an try to unstick a invoice already delayed by the bank-crypto conflict. Commentary factors to the midterm timing and the dearth of bipartisan runway as structural dangers to passage if this drags on.
Even if everybody stays “professional crypto,” the calendar can kill the package deal. However, regulatory momentum fragments as a substitute of vanishing.
Even if CLARITY slips, stablecoin guidelines nonetheless transfer by way of present regulation and implementation. GENIUS implementation questions are a part of why “loophole” fights matter. The US finally ends up with a stablecoin regime however no unified market-structure perimeter.
That means enforcement and company interpretation fill the hole.
“No CLARITY” does not imply “no regulation.” It means extra path dependence: case-by-case constraints, uneven state and federal overlays, and product design formed by enforcement threat reasonably than statutory readability.
Stablecoins transfer sooner than the broader token market as a result of they contact banks, deposits, and funds, areas the place regulators have already got instruments.
Tribalism survives even when CLARITY passes
The stablecoin yield fight uncovered that “crypto” just isn’t a single foyer however competing revenue facilities with completely different optimum guidelines.
The coalition is enterprise fashions versus enterprise fashions, and not “crypto versus banks.” The fault strains now run by the business itself.
Brogan Law reported that Tether’s US operation informed Senate Banking members it helps the draft method limiting yield and distanced itself from Coinbase’s decision to take the fight public.
The logic is evident: Coinbase and USDC distribution economics make rewards central to progress, whereas Tether’s dominant offshore footprint makes it much less depending on US retail reward mechanics.
The cut up issues as a result of it sets expectations for future legislative fights.
Once “stablecoin yield” turns into the gating issue for market construction, it turns into a reusable veto level. Next time Congress tries to legislate DeFi, custody, or taxation, count on companies to defect early if the draft threatens their profit-and-loss statements.
This has everlasting results even when a deal is struck.
Banks now have a template: pair monetary stability memos with community-bank “native lending” narratives and drive a tough yes-or-no on financial incentives.
Additionally, international aggressive framing hardens, as different jurisdictions actively license and construction regimes. Meanwhile, the US indecision turns into a part of the story companies inform boards about the place to base product strains.
The query that is still open
The stablecoin yield struggle is a structurally inevitable collision that happens when cost devices scale massive sufficient to perform as deposit substitutes, routing the risk-free price to shoppers.
Regulators worldwide agree on a precept: cost stablecoins mustn’t resemble financial savings merchandise. The US tried to thread that needle by banning issuer curiosity whereas leaving third-party rewards ambiguous.
That ambiguity is now the battleground. Whether it leads to an activity-based compromise, a reserve-placement deal, or a retail-versus-institutional cut up, the end result determines not simply CLARITY’s destiny but additionally the blueprint for each future crypto invoice.
The fight clarifies what “crypto-friendly regulation” truly means: not frictionless adoption, however negotiated settlements the place somebody’s enterprise mannequin loses.
The deadline is February 28. What occurs subsequent determines whether or not the US enacts complete digital asset laws in 2026 or watches stablecoin guidelines advance whereas market construction fragments into company enforcement and jurisdictional patchwork.
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