The Crypto Clarity Act and the Stablecoin Problem

The Digital Assets Market Clarity Act, known simply as the Clarity Act, is a landmark piece of legislation currently fighting its way through the U.S. Congress. After passing the House of Representatives in July 2025, the bill must now progress through the Senate before it can become law. In this article, we will explore what the Clarity Act aims to do and how issues over stablecoin rewards are slowing it down.

Table of Contents

• What is the Clarity Act
• Hurdles in the way
• The stablecoin problem
• Genius vs. Clarity Act
• Coinbase pulls support
• The EU and MiCA
• When will the Clarity Act actually pass?
• How will the Clarity Act affect you?

What is the Clarity Act

The Clarity Act is a proposed United States federal law designed to establish a permanent regulatory framework for the cryptocurrency market.

The Clarity Act was created as part of a “one-two punch” alongside the Genius Act to end years of regulatory ambiguity.

While the Genius Act, which passed in July 2025, focused primarily on the payment infrastructure of stablecoins, the Clarity Act targets the broader financial ecosystem.

The main objectives of the Digital Assets Market Clarity Act are to:

• Establish rules for crypto assets: Set clear laws for how stocks and other financial products can legally exist on the blockchain.
• Regulate stablecoin rewards: Decide if crypto companies can legally pay interest on stablecoins, determining if they can compete directly with traditional bank savings accounts.
• Ensure safety: Update U.S. laws to make sure these new digital assets follow the same safety standards as traditional money.

Hurdles in the way

The path forward for the Clarity Act has been anything but clear, however. In January 2026, the bill was scheduled to be finalized by the Senate Banking Committee, but the meeting was abruptly postponed after major industry player Coinbase pulled its support.

In an effort to break the deadlock, President Trump hosted a high-stakes White House meeting on Monday between banking and crypto leaders. The goal was to address the “stablecoin stalemate” that has stalled the bill’s progress. While there have been White House meetings before, this legislation has sparked particularly prickly dealings between crypto and banking industry figures.

The stablecoin problem

The main sticking point comes down to a fundamental disagreement over stablecoin rewards, and specifically, whether they are an innovative feature of digital finance or an unfair threat to traditional bank deposits.

Banks argue that high-yield stablecoin rewards (often reaching 10% APY) are a “loophole” that unfairly mimics bank deposits without adhering to strict banking regulations. The banks fear that if stablecoins offer interest, customers will move their money to where the yield is. The banks argue this shift wouldn’t just hurt individual banks: it could threaten financial stability across the board.

Crypto firms counter that these rewards aren’t a loophole, but a natural result of blockchain’s efficiency. They believe consumers deserve the freedom to ditch traditional banks in favor of better returns.

According to Reuters, the industry stance is clear: “Crypto companies say providing rewards such as interest is crucial for recruiting new customers and that barring them from doing so would be anti-competitive.”

Genius vs. Clarity Act

To understand the current friction, we must look at the Genius Act. As the first major piece of federal crypto legislation in the U.S., the Genius Act focused on the payment infrastructure of stablecoins like USDT and USDC.

While the Genius Act and the Clarity Act were originally introduced together in 2025, the Genius Act actually created the initial ban on interest for “payment stablecoins.” The current fight in the Clarity Act negotiations is whether crypto firms can find a regulated “loophole” to offer rewards regardless, or if that ban should remain universal.

Coinbase pulls support

The tension reached a breaking point in January 2026 when Coinbase withdrew its support for the Clarity Act. According to Fintech Weekly, the company was dissatisfied with how “the draft effectively restricts tokenized equities by limiting how blockchain-based shares and financial instruments can operate on crypto infrastructure.”

This withdrawal complicates matters for the President. Trump enjoyed significant support among cryptocurrency users in the 2024 election and has vowed to make America the “crypto capital of the world.”

As we edge towards the autumn voting season, lawmakers will be eager to get legislation over the line, though significant hurdles remain.

When will the Clarity Act actually pass?

The short answer is: probably not immediately, and possibly not even this year. While the bill cleared the House back in July 2025, it hit a wall in the Senate this January when Coinbase pulled its support. The standoff is serious enough that Citi analysts are now warning that the delay could drag on into 2027.

That said, don’t count 2026 out just yet. With election season approaching this autumn, the White House is desperate for a legislative win to back up Trump’s crypto promises. If lawmakers can find a quick compromise on the yield issue, they might try to force the bill through before campaign season takes over—but the window to make that happen is closing fast.

How will the Clarity Act affect you?

The outcome of this legislative tug-of-war in Washington will directly impact the returns available to U.S. consumers.

If the banking sector prevails and stablecoin rewards are permanently classified as interest, issuers may be forced to obtain banking charters or cease offering yield-generating products entirely. For the average user, this would likely mean the end of double-digit percentage yields—like 10% APY offers —bringing returns in line with standard savings accounts.

However, if the final version of the Clarity Act favors the crypto industry’s stance, users could see these high-yield products become a permanent, regulated fixture of the U.S. financial landscape. This would likely come with new consumer protections, such as mandatory disclosures about yield generation and stricter reserve requirements to ensure funds remain safe.

Read the Digital Asset Market Clarity Act

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