US stablecoin compromise making enemies on both sides

U.S. digital asset market structure legislation keeps annoying stablecoin stakeholders, but President Donald Trump says all they have to do is call and he’ll make all their troubles go away.

On March 27, Crypto in America’s Eleanor Terrett reported that the Senate Banking Committee will, at some unspecified point this week, release the text of its latest effort to reach a mutually acceptable compromise on the stablecoin ‘yield v reward’ section of the committee’s CLARITY Act.

A few days earlier, reports spread of an agreement on the yield/reward issue between the committee and the White House, which has been playing mediator between two warring factions: crypto operators, who want to go on offering ‘rewards’ to their customers; and the banking sector, which wants crypto platforms subject to the same ‘yield’ prohibition imposed on stablecoin issuers under the GENIUS Act.

Not long after those initial ‘agreement’ reports, Punchbowl News reported that the Coinbase (NASDAQ: COIN) digital asset exchange had informed Senate staff that it couldn’t support the proposed compromise as written. The exchange reportedly had ‘significant concerns’ about the stablecoin language, although these concerns were supposedly ‘less severe’ than the ones the exchange held in January, when it abruptly withdrew its support for CLARITY the night before a scheduled markup session.

The current compromise would reportedly eliminate platforms’ ability to offer rewards to customers who passively hold stablecoins on the platforms, while permitting rewards for customers who use those stablecoins to engage in certain activities. The scope of these permissible activities remains non-public, although promotional/loyalty programs are said to be among them.

Stablecoin rewards supply Coinbase with 20% of its overall revenue, which the exchange is understandably reluctant to give up. But Coinbase’s intransigence is causing friction within the broader crypto sector, most of whom want to see CLARITY passed while Republicans still hold control of both legislative chambers.

But the banking sector is reportedly equally unimpressed with the proposed compromise, continuing to insist that allowing crypto platforms to offer any kind of deposit interest to customers effectively makes them banks, without subjecting them to the regulatory scrutiny that banks must face.

On March 25, White House crypto adviser Patrick Witt attempted to limit public speculation, tweeting his dismissal of the “uninformed FUD [fear, uncertainty and doubt] circulating on social media.” Two days later, Witt tweeted his musings on “how a future Democrat administration will handle stablecoin rewards” and other digital asset regulatory issues. “Block passage of the CLARITY Act to find out!”

Court rejects DeFi dev’s bid for prior restraint against DoJ

Among the other potential CLARITY tripwires is whether to offer decentralized finance (DeFi) developers legal immunity if/when their platforms are used for illicit purposes, like when North Korean hackers or money launderers look to mask the digital trail of their ill-gotten tokens by using a coin mixer or a bridging platform to hop from one blockchain to another.

Efforts have been made to incorporate protections, such as the Blockchain Regulatory Certainty Act (BRCA), into CLARITY. But the last public CLARITY draft also featured new language in the Defi segment (Title III) that appeared to undermine those protections.

On March 27, BRCA co-author Sen. Cynthia Lummis (R-WY) pushed back on claims that developers would be left unprotected in the latest CLARITY draft. Lummis tweeted that Banking members “have worked on a bipartisan basis for the last few weeks to make changes to Title 3 that make this bill the strongest protection for DeFi and developers ever enacted.”

Regardless, some DeFi devs are trying to take matters into their own hands, but here too they’re falling short. On March 25, the U.S. District Court for the Northern District of Texas (Fort Worth Division) granted the Department of Justice’s (DoJ) motion to dismiss a lawsuit brought by a developer looking to pre-emptively protect himself from future federal prosecution.

The suit was filed in January 2025 by Michael Lewellen, a developer looking to issue software (Pharos) built to facilitate crypto-based crowdfunding campaigns. Lewellen claimed to fear being prosecuted for illegal money transmission because his software offers the ability to raise funds in a “privacy-protecting manner.” So Lewellen sought protective relief, including “a declaration that his planned activity is lawful and an injunction preventing [the DoJ] from bringing any action against him.”

The court rejected Lewellen’s claim, noting that he’d failed to show that he’s suffered any injury or that there’s a substantial threat of prosecution, meaning he lacks standing to bring a pre-enforcement challenge. The court also noted that the DoJ issued a memo a year ago, citing its unwillingness to prosecute developers “for the acts of their end users or unwitting violations of regulations.”

Lewellen tweeted his disappointment at the ruling, saying “a non-binding DoJ memo is no substitute for real legal certainty.” Lewellen suggested he might appeal the ruling but added that “we need Congress to pass the BRCA to end this threat once and for all.”

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Is SEC killing regulatory probes of Trump crypto ventures?

Another CLARITY tripwire is the ‘ethics’ issue, aka Democrats’ desire to ensure that elected officials—including the president—and their families can’t profit off crypto ventures while influencing legislation/regulation. With the Trump family reportedly having earned over a billion dollars from their crypto projects since Donald returned to the White House, Dems appear unwilling to let this issue slide.

Last week, Reuters reported that the March 16 resignation of Margaret Ryan, the former enforcement director at the Securities and Exchange Commission (SEC), was because she “clashed with agency leaders over the direction of its enforcement program, including the handling of cases with ties to President ​Donald Trump and his family.”

Ryan, whose resignation letter cited no reason for leaving after just six months on the job, reportedly “wanted to be more aggressive in pursuing charges for fraud and other misconduct including in cases that touched the president’s circle, but faced resistance from SEC chair Paul Atkins and other top Republican political appointees.”

Among these cases was the market manipulation suit brought against TRON founder Justin Sun in 2023. Earlier this month, the SEC announced a settlement of the suit under which a Sun-linked company agreed to pay $10 million—less than one-third the reported profits from Sun’s alleged market manipulation—in exchange for all charges being dropped (without Sun having to admit guilt).

Despite many legal onlookers claiming there was more than enough evidence to secure a conviction, the SEC paused the suit last February, just a month after Trump took office. Before that pause, Sun funneled tens of millions of dollars into Trump’s crypto projects, leading many to suspect some kind of quid pro quo.

Neither Ryan nor the White House offered any comment to Reuters. An SEC spokesperson denied the existence of anything untoward in Ryan’s exit, claiming that “debate and discussion among our lawyers and other staff is common and encouraged.”

Blumenthal asked Atkins to supply (by April 13) all records and communications between SEC senior leadership and the enforcement division regarding “potential enforcement actions against cryptocurrency companies.”

Blumenthal also wants to see all records/communications between the SEC and “any member of the Trump family or Witkoff family, or any agent thereof regarding World Liberty Financial [WLF] or the $TRUMP token since January 20, 2025.”

WLF’s CEO is Zach Witkoff, son of Steve Witkoff, a longtime friend of the president who currently serves as a presidential envoy. Both Witkoffs are WLF co-founders, as is the president and his three sons, Don Jr., Eric, and Barron.

WLF, which issues the USD1 stablecoin, has proven a more controversial Trump crypto project than some others. It was recently revealed that a UAE government official paid $500 million for a 49% stake in WLF, with much of that sum going to the Trump and Witkoff families, which left Democrats voicing concerns over foreign influence.

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Sacks out as Czar, in as Science & Tech councillor

Tech investor David Sacks’ tenure as the White House’s ‘AI & Crypto Czar’ has reached the end of its permitted 130 non-consecutive-day duration for a ‘special government employee.’ Sacks announced his exit last week in a Bloomberg interview in which he revealed that he’s not actually going anywhere, only his title is changing.

Fox Business quoted a ‘senior adviser to the president’ saying Sacks “will always be [Trump’s] crypto and AI czar, but to the admin more broadly, this new role will allow him to advise on a broader range of critical tech issues.”

Sacks’ czar-no-more announcement coincided with his being named co-chair of the new President’s Council of Advisors on Science and Technology (PCAST), which Sacks called “the principal body of external advisors tasked with shaping science, technology, and innovation policy for the President and the White House.” PCAST will “make policy recommendations to ensure that America leads—and wins—in artificial intelligence and other cutting-edge technologies.”

The 13 other “initial” PCAST members (of “up to 24”) include Marc Andreessen, co-founder of the Andreessen Horowitz (a16z) (NASDAQ: ZADIHX) venture capital group, Coinbase co-founder Fred Ehrsam, Nvidia (NASDAQ: NVDA) boss Jensen Huang, Mark Zuckerberg of Meta (NASDAQ: META), and Larry Ellison of Oracle.

On his X account, Sacks fielded kudos from crypto fans, while continuing to lobby for CLARITY’s passage. However, some critics pointed out that the former Czar failed to release a formal audit of the federal government’s digital asset holdings—aka tokens seized from crypto crooks—that make up the Strategic Bitcoin Reserve and the Digital Asset Stockpile, despite a deadline of April 5, 2025, to complete that audit.

The voices seeking this accounting grew louder this year after word spread that a federal contractor hired to custody the government-owned tokens had in fact stolen $46 million worth of them. While the culprit was ultimately caught, most taxpayers continue to insist that they have a right to know what the government holds on their behalf.

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PAC up your troubles

The Coinbase-funded astroturf group Stand with Crypto (SwC) officially launched its 2026 midterm election initiative last week. The 2026 Voter Hub offers single-issue crypto voters the appropriate nudge towards crypto’s preferred candidates in some key battleground races.

The launch was accompanied by an Impact Research survey of 1,000 Americans (half of whom are SwC ‘advocates’) that found token holders are “a potential major swing voting bloc,” given that 59% of those surveyed don’t always vote for the same party. The survey also claims that those owning digital assets are “more motivated to vote” than those unpatriotic sods who don’t own crypto.

Another Coinbase-funded effort, the crypto-focused Fairshake political action committee (PAC), had a disappointingly tepid impact on the recent Illinois primary races. This included spending $10 million on a failed bid to block Lt. Gov. Juliana Stratton from becoming the Democratic candidate to replace the retiring Sen. Dick Durbin this November (a lock for Stratton, given the state’s demographics).

That hasn’t stopped other blockchain-focused PACs from throwing their wallets into this ring. Monday brought the launch of the Blockchain Leadership Fund (BLF), a group founded by “industry leaders in the digital asset sector, including members of The Digital Chamber.”

BLF’s stated mission is to (wait for it) support “candidates working to advance digital asset and blockchain policy in the United States.” BLF’s efforts will favor pro-crypto candidates at the federal, state, and local levels, utilizing both direct candidate contributions and independent expenditures.

BLF’s founding contributors include digital custodian/bank (and stablecoin issuer) Anchorage Digital, and DeFi/tokenization mainstays Chainlink Labs. An unidentified Anchorage spokesperson said, “The companies that show up and engage will help define the rules of the road” for crypto. A similarly unnamed Chainlink rep said blockchain’s legislative path is “clearer than it’s been in years, yet still fragile.”

Anchorage CEO Nathan McCauley tweeted that the company’s BLF support marked an Anchorage first, but “we’re putting our money where our mouth is … because the stakes are that high and the window is that narrow.”

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Coinbase hires Trump-whispering lobbyists

Fairshake may not have gotten the results it wanted in Illinois, but the principal funder, Coinbase, knows how to get results in Washington. For instance, some marveled at the swiftness with which Coinbase CEO Brian Armstrong was able to translate a White House meeting with Trump into a Truth Social post blaming banks for holding up CLARITY.

Then again, maybe it’s not so curious. Last week, Politico reported that Armstrong’s face-to-face with Trump came just two days after Coinbase hired lobbying group Checkmate Government Relations, whose principals include Chris LaCivita Jr. Meanwhile, Chris LaCivita Sr. served as a senior adviser to Trump’s 2024 election campaign and has a seat on Coinbase’s global advisory council.

Also helping Coinbase is Checkmate’s Ches McDowell, noted for his “strong relationships with the Trump administration,” and James Johnson, a veteran of both Trump administrations.

Checkmate’s other clients include the Binance exchange, whose founder Changpeng ‘CZ’ Zhao was pardoned by Trump last year, erasing CZ’s 2023 conviction for violating the U.S. Bank Secrecy Act. Clearly, Checkmate has the president’s ear, making this a savvy (if cynical) move by Coinbase.

The president himself is making sure crypto execs know he’s ready to play the role of fixer. In remarks last week at the FII Priority Summit addressing his “bleeding edge” crypto policies, Trump said, “I tell people, if you have problems, call me .. Some of them are amazed. I actually take their call and get their problem solved.”

So, crypto execs, pick up the phone. White House operators are standing by to take your call. Just be sure to have your credit card ready.

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