US Crypto Bill Stalls as Banks Resist Stablecoin Yield

A major U.S. crypto reform bill has hit another roadblock, raising fresh uncertainty about whether the legislation will pass this year. Negotiations broke down after banks refused to support a compromise proposed by the White House, renewing tensions between traditional banks and the cryptocurrency industry.

Donald Trump criticised banks for opposing the proposal, saying lenders were trying to derail his administration’s digital asset agenda. Writing on his Truth Social platform on Tuesday evening, Trump wrote: 

“We are not going to allow them to undermine our powerful Crypto Agenda.”

Banks Push Back on Rewards Proposal

At the centre of the dispute is the Clarity Act, a landmark bill designed to establish clear regulatory definitions for digital assets and determine when tokens should be treated as securities, commodities, or other financial instruments.

Crypto companies say that the legislature would resolve years of regulatory ambiguity that have slowed growth across the sector, according to a CLARITY Act fact sheet released by the Senate Banking Committee. But the legislation stalled earlier this year after banks objected to provisions that would allow stablecoin issuers and crypto firms to offer yield-bearing products and reward programs. Banks worry that such incentives could attract deposits away from traditional financial institutions, reducing their ability to fund loans.

Standard Chartered estimates that stablecoins could siphon as much as $500 billion in deposits from U.S. banks by 2028. Meanwhile, major exchanges such as Coinbase argue that rewards programs are essential for customer acquisition and competitiveness. Industry leaders say banning such incentives would unfairly advantage banks and undermine crypto innovation.

White House Compromise Rejected

In an attempt to break the stalemate, the White House brokered a compromise last month. This proposal would allow stablecoin rewards in limited cases, such as peer-to-peer payments, but prohibit rewards on idle holdings.

While crypto firms have reportedly accepted the framework, banks say it still leaves too much room for deposit outflows. Industry representatives continue to push for stricter limits on when rewards can be offered.

The American Bankers Association said lenders have proposed alternatives that would allow the proposal to advance without jeopardising the stability of bank deposits. In a statement, the group said: 

“The risks to economic growth and financial stability are real if policymakers don’t get this right.”  

The Political Clock Is Ticking

The ongoing deadlock has fueled doubts about whether the legislation can pass in 2026. Lawmakers face a tight legislative calendar before leaving Washington this summer to begin campaigning for the midterm elections.

Adrian Wall, managing director of the Digital Sovereignty Alliance, warned the window for passage is rapidly closing.

“If this doesn’t get passed and put in front of the president by July, most people believe the opportunity will close because of the midterms,” he said.

Crypto Industry Steps Up Lobbying Efforts

The push for clearer regulation has been years in the making. The crypto industry spent more than $119 million backing pro-crypto candidates during the 2024 election cycle, hoping to accelerate passage of the Clarity Act and related legislation.

A separate stablecoin bill already became law last year, but it banned issuers from paying interest. Banks maintain that this law left a loophole that allows crypto exchanges and intermediaries to offer rewards instead – something they want the Clarity Act to address.

Executives from companies including Ripple and Coinbase, along with advocacy groups such as the Blockchain Association, have been involved in negotiations with policymakers.

Blockchain Association CEO Summer Mersinger said progress has been made despite the latest setback, and that the path to a workable agreement is clearer than it was a month ago.

More Obstacles Ahead

Even if negotiators resolve the dispute over rewards, the measure still faces additional political hurdles. Some Democratic lawmakers want provisions banning elected officials from profiting from crypto ventures – a proposal widely seen as targeting the Trump family’s World Liberty Financial project. Others are pushing for stricter anti-money-laundering rules. The legislation must also reconcile competing drafts produced by the Senate Banking and Senate Agriculture Committees before it can reach a floor vote.

According to Brian Gardner, chief Washington strategist at Stifel, geopolitical tensions and a crowded legislative calendar are adding further complications. With negotiations stalled and political pressure mounting, the fate of the Clarity Act – and broader U.S. crypto reform – remains uncertain.