The most consequential piece of crypto legislation in U.S. history is stuck — and the reason has nothing to do with crypto. The Digital Asset Market Clarity Act, which passed the House with 78 Democratic votes in July 2025, has stalled in the Senate Banking Committee over a single question: shoul...
"Rewards are the same as interest. If you are going to be holding balances and paying interest, that's the bank." — Jamie Dimon, CEO, JPMorgan Chase
The most consequential piece of crypto legislation in U.S. history is stuck — and the reason has nothing to do with crypto. The Digital Asset Market Clarity Act, which passed the House with 78 Democratic votes in July 2025, has stalled in the Senate Banking Committee over a single question: should stablecoin issuers be allowed to pay yield on customer balances?
On one side, JPMorgan CEO Jamie Dimon warns that yield-bearing stablecoins would siphon $6.6 trillion from the banking system, starving community banks of deposit funding and choking off credit to American businesses. On the other, Coinbase CEO Brian Armstrong calls the banks' position "regulatory capture" and notes that banks earn 4.4% on reserves parked at the Fed while paying depositors 0.01%. The White House's self-imposed March 1 deadline expired without a deal. Polymarket odds for the bill's passage in 2026 have whipsawed from 82% to as low as 42% — settling near 71% after President Trump publicly sided with the crypto industry on March 4.
This is no longer a regulatory skirmish. It is a $312 billion proxy war for the future architecture of the U.S. dollar system — and the clock is ticking toward midterm paralysis.
The CLARITY Act (formally the Digital Asset Market Clarity Act of 2025, H.R. 3633) was designed to end the era of regulation-by-enforcement in crypto. It passed the House on July 17, 2025, by a bipartisan 294-134 vote, establishing a framework to classify tokens as either digital commodities overseen by the CFTC or digital securities regulated by the SEC.
The bill moved to the Senate with momentum. The Senate Agriculture Committee advanced its own companion framework, and the Banking Committee scheduled a markup for January 2026. Then the stablecoin yield question detonated the process.
In mid-January, Coinbase CEO Brian Armstrong withdrew the company's support for the bill hours before the Banking Committee's markup, citing language that would ban crypto platforms from paying yield on stablecoin balances. The markup was indefinitely postponed. Two White House-hosted negotiation sessions in February 2026 failed to produce a compromise. The administration's self-imposed March 1 deadline came and went without resolution.
The Senate Banking Committee is now eyeing a mid-to-late March 2026 markup as a second attempt. But with midterm elections in November 2026, the legislative window is rapidly closing. As House Financial Services Committee Chairman French Hill put it at the Milken Institute's Future of Finance event: "If the Senate can't come to a straightforward conclusion here, I recommend they use the language that we have in the House-passed Clarity Act with 78 Democratic votes on it."
The banking industry's opposition rests on a single, powerful data point. A U.S. Treasury study found that banks could lose up to $6.6 trillion in deposits if stablecoin issuers were permitted to offer yield on customer balances. For context, total U.S. bank deposits stood at approximately $17.8 trillion as of late 2025 — meaning the industry fears losing roughly 37% of its deposit base.
Jamie Dimon crystallized the argument on CNBC on March 3, 2026: yield-bearing stablecoin balances are functionally identical to interest-bearing deposit accounts, and entities offering them should be subject to bank-level regulation, including capital requirements, FDIC-equivalent insurance, and anti-money laundering compliance. "It can't be, you have these people doing one thing without any regulation, and these people doing another. If you do that, the public will pay. It will get bad," Dimon said.
The Bank Policy Institute, representing major U.S. lenders, has argued that if deposits migrate to stablecoin issuers, smaller and regional banks that rely disproportionately on deposit funding would face a liquidity squeeze. This could reduce credit availability across the real economy — a systemic risk argument that resonates with moderate senators from both parties.
The banking industry's framing is straightforward: this is not anti-innovation, it is pro-financial-stability. The question is whether the data supports that framing at the scale banks claim.
The crypto industry's rebuttal attacks both the premise and the math. Brian Armstrong has been the most vocal, highlighting what he describes as a profound asymmetry: banks earn approximately 4.4% on excess reserves parked at the Federal Reserve, while the average savings account pays 0.01%. The spread between what banks earn and what they pay customers is, in Armstrong's framing, the real regulatory capture story.
"The banks are really coming and trying to undermine the president's crypto agenda," Armstrong told Fox Business, accusing them of "trying to protect their own profit margins, taking money out of the pockets of hardworking, average Americans and putting it into the coffers of big banks hitting record profits."
The financial data adds weight to this argument. Coinbase earned $332.5 million in stablecoin revenue in Q4 2025 alone, driven primarily by interest earned on USDC reserves. Average USDC held on Coinbase products reached an all-time high of $17.8 billion. Bloomberg Intelligence projects Coinbase's stablecoin revenue could grow two-to-seven-fold under favorable regulation — making this, for Coinbase, quite literally a bet-the-company issue.
Armstrong has also made the competitive argument: if the U.S. bans stablecoin yield, the innovation simply moves offshore. Circle, the issuer of USDC, already generates revenue from reserve interest — the question is whether that value accrues to American consumers or is captured entirely by issuers and intermediaries.
Importantly, Armstrong predicts that "the banks will actually flip and be lobbying FOR the ability to pay interest and yield on stablecoins in a few years" — an argument that frames the current opposition as a rearguard action against an inevitable technological shift.
Behind closed doors, negotiators have been circling a middle-ground framework that would draw a line between passive and active yield:
This distinction matters enormously for economic value distribution. Passive yield competes directly with bank deposits. Active yield functions more like compensation for providing a service to the network — a fundamentally different economic relationship.
Patrick Witt, executive director of the President's Council of Advisors for Digital Assets, offered the administration's analytical framework on March 4: "The deceit here is that it is not the paying of yield on a balance per se that necessitates bank-like regulations, but rather the lending out or rehypothecation of the dollars that make up the underlying balance." Under the GENIUS Act (already signed into law), stablecoin issuers are explicitly prohibited from lending reserves — meaning the deposit-flight argument may overstate the risk.
The compromise language, however, raises its own questions. Who defines "active participation"? Does earning rewards for holding USDC in a DeFi liquidity pool count? What about governance staking? The operational ambiguity could create a new generation of regulatory grey zones.
On March 4, 2026, President Trump publicly broke with the banking lobby. "The Genius Act is being threatened and undermined by the Banks, and that is unacceptable," Trump posted on Truth Social. "They need to make a good deal with the Crypto Industry because that's what's in best interest of the American People."
The intervention followed a meeting between Trump and Coinbase CEO Brian Armstrong at the White House. Shares of Coinbase surged more than 12% the following day. Strategy (formerly MicroStrategy) gained 9%, and Circle jumped nearly 6%.
Eric Trump, co-founder of World Liberty Financial — the Trump family's DeFi venture — escalated further, calling banks "anti-American" over the stablecoin fight. The family's direct financial exposure to DeFi infrastructure has drawn scrutiny, but the political signal is unmistakable: the White House views the CLARITY Act as a legacy priority and will not let the banking lobby run the clock.
Prediction markets have become the real-time barometer for legislative probability. On Polymarket, "Clarity Act signed into law in 2026?" has seen dramatic volatility:
| Date | Polymarket Odds | Catalyst | |------|----------------|----------| | Late January | 54% | Initial Senate delays | | Late February | 82% | Optimism around White House negotiations | | Post-deadline miss | 42% | March 1 deadline expired without a deal | | March 4 | ~71% | Trump publicly sides with crypto |
Kalshi markets paint a more granular picture: only a 6% probability of passage before April, 22% before May, and 41% before June. The market consensus is that mid-year remains the most likely window — aligned with JPMorgan's own institutional forecast.
JPMorgan's digital assets team published a note on February 26 calling the CLARITY Act a potential "positive catalyst for crypto markets in the second half of the year" if passed by mid-2026. The bank outlined specific benefits: a grandfather clause that would place ETF-linked assets like XRP, Solana, and Litecoin under lighter CFTC oversight, a $75 million annual fundraising grace period for new projects, and a clear framework that could unlock institutional capital currently sidelined by regulatory ambiguity.
The stablecoin market itself has grown to $312 billion in total supply, with $33 trillion in transaction volume during 2025 — a 72% year-over-year increase. USDT and USDC together account for 93% of market capitalization, with over 90% of fiat-backed stablecoins pegged to the U.S. dollar. Visa's stablecoin settlement infrastructure has reached a $4.5 billion annualized run rate.
Strip away the politics and this fight is fundamentally about where the interest income on $312 billion in stablecoin reserves flows. At current rates, those reserves generate approximately $13-15 billion annually in interest income. Today, that value is split between issuers (Circle, Tether) and platforms (Coinbase). If yield is passed through to consumers, the economics of the stablecoin business change — and so does the competitive threat to bank deposits.
The banking industry's $6.6 trillion deposit-flight estimate assumes full yield pass-through and broad consumer adoption. Reality is likely more nuanced. Crypto-native users already have access to DeFi yield strategies. The marginal depositor who would switch from a bank savings account to a stablecoin yield product is price-sensitive, digitally literate, and likely holds a relatively small balance. The systemic risk scenario requires a behavioral shift that may take years, not months.
But the directional threat is real. If the CLARITY Act passes with yield provisions intact, it establishes a legal framework for what is effectively a parallel, dollar-denominated savings infrastructure — one that operates 24/7 on public blockchains, settles in minutes rather than days, and can be programmatically composed with other financial services. That is an existential product question for traditional banking, regardless of the initial scale.
The CLARITY Act is stalled over stablecoin yield, not crypto. The broader market structure provisions enjoy bipartisan support. The entire bill is being held hostage by a single economic question about who profits from stablecoin reserve interest.
The numbers are real on both sides. Banks face a legitimate competitive threat to deposit funding. Crypto firms face a legitimate risk of regulatory capture that locks consumers into inferior savings products. A U.S. Treasury study estimates potential deposit outflows of $6.6 trillion; Coinbase's stablecoin revenue alone exceeded $1.3 billion annualized in Q4 2025.
The compromise framework — banning passive yield but allowing active rewards — creates its own complexity. Defining "active participation" in an ecosystem built on composability and programmable money is an exercise in drawing lines on water.
The legislative clock is the real constraint. Midterm election dynamics effectively kill major legislation after July 2026. If the Senate does not move by late spring, the entire market structure framework could slip to 2027 — with significant implications for institutional capital allocation.
The White House has chosen a side. Trump's March 4 intervention escalates the political stakes. Banking lobbyists now face not just crypto industry opposition, but direct presidential pressure.
The CLARITY Act fight reveals a deeper truth about the stablecoin economy: it has grown large enough to threaten the core business model of American banking. A $312 billion market generating $33 trillion in annual transaction volume is no longer a fintech experiment — it is a parallel financial rail that demands a regulatory framework.
The irony is that both sides may be right. Banks are correct that unrestricted stablecoin yield could accelerate deposit migration. Crypto firms are correct that blocking yield protects bank margins at consumers' expense. The compromise — active rewards only — threads the needle in theory but will be tested immediately by an industry whose defining characteristic is creative financial engineering.
The market is pricing in a mid-year resolution. JPMorgan sees the bill as a catalyst. Polymarket sees 71% odds. But the legislative path runs through a Senate Banking Committee that has already postponed twice, a stablecoin yield debate where both sides have dug in, and a midterm election calendar that compresses every timeline.
For investors, builders, and institutions watching this space: the CLARITY Act is no longer just a regulatory question. It is the single most important variable for whether the next phase of the stablecoin economy is built in the United States or elsewhere.