A White House target for resolving the disputes on stablecoin yield to advance the CLARITY Act, passed on March 1, without agreement. Negotiations between the crypto industry and the banking sector remained stalled over key policy questions.

The debate over stablecoin yield provisions has emerged as one of the most contentious issues in the legislative process. Both the CLARITY Act and the GENIUS Act already prohibit passive yield, meaning interest paid solely for holding payment stablecoins.

Instead, the current dispute centers on whether to permit stablecoin issuers to offer limited activity-based rewards, such as incentives tied to transactions, liquidity provision, or staking-related activity. Now, Senate lawmakers are exploring a potential bipartisan compromise that could revive negotiations and move the bill forward.

White House Target Passed Without Agreement

The CLARITY Act has been widely discussed as one of the most significant efforts to establish a comprehensive regulatory framework for digital assets in the United States. Earlier this year, the White House encouraged lawmakers and industry groups to reach a consensus on the legislation by March 1.

The date was intended as a policy milestone rather than a formal legislative deadline. However, talks between crypto advocates, banking groups, and policymakers failed to produce a compromise before the target deadline passed.

The stalled negotiations highlighted the growing divide. Crypto companies are seeking regulatory clarity while banks remain concerned about the impact of stablecoins on the traditional financial system.

The debate is also linked to the interaction between two pieces of legislation. The GENIUS Act focuses on stablecoin issuers and reserve requirements and was already passed by Congress last summer. The CLARITY Act addresses market structure rules for digital assets and trading platforms.

Stablecoin Yield Becomes a Central Dispute

One of the most contentious topics in the debate is how stablecoin incentives should be structured under the legislation. Both the CLARITY Act, through Section 404, and the GENIUS Act already prohibit passive yield on payment stablecoins.

That means issuers may not offer interest solely for holding a stablecoin balance. The ongoing dispute concerns whether issuers may provide activity-based rewards for payment usage, liquidity participation, or staking-related services within blockchain ecosystems.

Banks have pushed back even on these narrower forms of incentives. They warn that they could function as disguised interest and compete with deposit products. As a result, the question of stablecoin yield rules has become a central obstacle in negotiations between the two sectors.

Some Regulators Say Banks Could Benefit

Though banks have raised objections to parts of the legislation, several policymakers and former regulators have suggested the bill could ultimately benefit traditional financial institutions. Supporters of this view argue that regulatory clarity would give banks a clear legal pathway to expand into digital asset services.

Large financial institutions already have the compliance infrastructure and customer base to expand into digital assets. That position could allow them to issue stablecoins, offer custody services, or integrate blockchain-based payment systems. The GENIUS Act regulates stablecoin issuers and reserve requirements. The CLARITY Act, meanwhile, would define the market structure rules for exchanges and digital asset trading. Together, these two frameworks could allow banks to participate more directly in crypto markets.

From that perspective, clearer rules could indeed strengthen the role of traditional finance within the emerging digital asset ecosystem.

Political Pressure Builds Around Crypto Legislation

The stalled negotiations have also drawn criticism from industry leaders and policymakers who want the United States to move faster on digital asset regulation. Some officials have warned that prolonged uncertainty could push crypto innovation and investment toward jurisdictions that have already adopted clearer regulatory frameworks.

Industry executives have also expressed frustration with what they describe as banking sector resistance to certain provisions of the bill. The debate has intensified as stablecoins become increasingly important for payments, trading infrastructure, and cross-border transactions.

Despite the pressure, lawmakers still face difficult policy questions about stablecoin oversight and financial stability safeguards. They must also decide how to divide regulatory responsibilities among U.S. agencies.

Senators Seek Compromise to Revive Negotiations

Amid the ongoing stalemate, Senators Angela Alsobrooks (D-MD) and Thom Tillis (R-NC) are leading a bipartisan effort to develop a compromise to break the deadlock. Their discussions focus on how activity-based stablecoin rewards can fit within the CLARITY Act while respecting the ban on passive yield. If they succeed, it could enable Senate Banking markup in late March.

Banks remain cautious even about these narrower incentives, arguing that transaction-based or liquidity-related rewards could still evolve into deposit-like products. The compromise would set clearer guardrails around permitted incentives while allowing stablecoin networks to support legitimate blockchain activity.

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What Comes Next for the CLARITY Act

The future of the CLARITY Act remains uncertain as negotiations continue in Washington. If lawmakers can reach an agreement on how activity-based rewards should work alongside the existing ban on passive stablecoin yield, the bill could regain momentum as part of a broader regulatory framework paired with the GENIUS Act.

With the GENIUS Act already setting rules for stablecoin issuers, the CLARITY Act would complement this by shaping market structure across the broader ecosystem. The talks show how challenging it is to balance concerns over banking stability with blockchain’s fast growth.