Stablecoin Yield Fight Splits Banks As Clarity Act Heads Toward Markup
Consumer facing banks are pushing back on the Senate’s stablecoin yield compromise, while other institutions are increasingly willing to move forward in favor of broader crypto access
Welcome to the Wednesday edition of the Crypto In America newsletter!
What you’ll read: As lawmakers move on from stablecoin yield, some banks remain dug in; Brad Garlinghouse talks XRP’s future and the Clarity Act time crunch; plus, the top news shaping the week.
The stablecoin yield compromise is exposing a growing divide amidst banks: some lenders think the Clarity Act should be held up to address lingering concerns, while others want to advance it to gain broader access to the digital asset market.
At a high level, the split appears to track business models. Banks with large consumer-facing operations are pushing back on the Senate’s latest Clarity Act language released last Friday, while lenders without major retail exposure appear more willing to accept the compromise and advance broader legislation to open the door to the nearly $3 trillion crypto industry.
A group of Washington’s biggest banking trade associations, including the Bank Policy Institute, American Bankers Association and Independent Community Bankers of America, have weighed in on the final compromise text, arguing the proposed language “falls short” of the goal of prohibiting the payment of yield and interest on stablecoins. The text was released by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) last week.
The issue at heart is that the language remains too narrowly drafted, leaving room for firms offering crypto products like Coinbase and Stripe to structure “risky products” that achieve similar outcomes despite the bill prohibiting “economically or functionally equivalent” bank-like products, a source from one of the larger retail banks aligned with this view told Crypto In America.
The source argued that distinction could matter more in the post-Loper Bright Enterprises v. Raimondo environment, where courts are expected to interpret statutes narrowly rather than defer broadly to regulators.
“It’s not a true compromise because it doesn’t eliminate yield completely; it just changes how it’s offered,” this person argued, warning the framework undermines the traditional banking industry.
This dissatisfied lobby doesn’t plan on backing down, even though Senators Tillis and Alsobrooks signaled in a joint statement on Monday that discussions over the issue, stretching for more than three months, have ended. Senator Cynthia Lummis (R-WY) also said in an X post on Monday that the text was “finalized.”
Banking trade groups plan to ramp up outreach to additional members of the Senate Banking Committee in the coming days as lawmakers prepare to mark up the bill next week, the large retail bank source told Crypto In America.
“We’re going to keep making the argument that their proposal, while well-intentioned, does not come close to closing the loophole,” the source said.
Meanwhile, institutions without large retail businesses — think Goldman Sachs, BNY and Morgan Stanley — have signaled they are more willing to accept the compromise language, largely because it would meaningfully expand their access to the digital asset industry.
The Clarity Act would give banks clearer legal authority and regulatory comfort under the Bank Holding Company Act to participate in crypto activities like trading, staking and lending. It also lays the groundwork for future developments like portfolio margining and more integrated crypto trading infrastructure, and limits the ability of future regulators to prohibit those activities on grounds that they are not “financial” in nature.
While the stablecoin compromise, and the Clarity Act more broadly, may benefit larger institutions, questions remain about how smaller community banks will fare under the framework.
For these smaller outfits, the biggest concern remains deposit flight and the knock-on effects it could have on local lending activity.
The Independent Community Bankers of America, which represents smaller banks in Washington, has publicly pushed back on the language, while some community banks in the Midwest and on the East Coast have privately voiced support for the framework. One bank even described it as a “fair compromise” that encourages stablecoins to function more as a payment mechanism than a store of value.
Ripple CEO On XRP’s Future And Clarity Crunch
This week on the podcast, Eleanor spoke with Ripple CEO Brad Garlinghouse at XRP Las Vegas, where they discussed the company’s stablecoin strategy, XRP’s long term positioning, and whether XRP holders should benefit more directly from Ripple’s success. The conversation also dove into Ripple’s reported $50 billion valuation, and the latest on its OCC trust charter application.
Garlinghouse also weighed in on the state of crypto legislation in Washington, including why he believes the industry could be in trouble if the Clarity Act does not clear committee by the third week of May.
The discussion also explored midterm Super PAC spending, why XRP remains on solid regulatory footing even if legislation stalls, and why Ripple sees major opportunity ahead regardless of what happens in Congress.
Watch this episode on all platforms here.
Midweek Recap
ICYMI: Here are some of the biggest stories making headlines this week.
Michael Saylor proposed using bitcoin sales to support dividends as Strategy reported a $12.54 billion Q1 loss.
Coinbase announced it’s cutting roughly 14% of its workforce, citing accelerated adoption of AI across the company.
Morgan Stanley launched crypto trading on E*TRADE with 0.50% fees, making it one of the cheaper offerings among major brokerage platforms.
Anchorage Digital and Google Cloud unveiled Agentic Banking, allowing AI agents to transact across traditional financial and crypto rails without human involvement.
MoonPay acquired DFlow, a Solana Labs-based trading infrastructure platform.
World Liberty Financial is suing Justin Sun for defamation, accusing the TRON founder of launching a “public smear campaign” after Sun sued the Trump-backed crypto platform in April over claims it illegally froze his tokens.
CFTC Chair Michael Selig said the agency is increasingly using AI to monitor derivatives markets.
The Securities and Exchange Commission proposed moving public companies from quarterly to semiannual reporting requirements.
CME Group is launching bitcoin volatility futures on June 1 as institutional demand for crypto derivatives continues to grow.
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