CLARITY Bill Interpretation: The White House and Trump jointly pressure the Senate, with stablecoin yield provisions becoming the focal point of the debate

On April 19, 2026, the White House publicly called on the banking industry to “move forward” in negotiations over the CLARITY Act’s stablecoin yield provisions, and characterized obstructive banking institutions as “greedy”—marking the most direct public criticism of the banking industry’s lobbying efforts by the U.S. administration to date. On the same day, President Trump tweeted twice in support of the CLARITY Act, while Treasury Secretary Scott Bessent stated that the bill would make the U.S. the “most comprehensive country in crypto regulation.” The executive and fiscal systems jointly exerted pressure during the same weekend, a first in the history of crypto legislation.

The timing of this pressure reflects clear strategic considerations. The Senate Banking Committee’s markup target window is set for late April. Over a week has passed since the Senate reconvened after the Easter recess, and the legislative clock is in its final sprint. Digital asset presidential advisor Patrick Witt revealed at the Solana Policy Research Institute summit that the bill must be advanced out of the Banking Committee before the August recess, followed by Senate approval, reconciliation, House approval, and finally delivery to the President’s desk. The late April markup in the Senate Banking Committee is seen as the “last window” for 2026 legislation; missing this deadline would delay the bill until 2027.

The White House’s decision to act now is essentially to create political space for the Tillis-Alsobrooks compromise plan (which bans passive yield holdings but allows activity-based incentives), using executive authority to reset the negotiation balance.

What core regulatory issues does the CLARITY Act aim to address?

The full name of the CLARITY Act is the “Digital Asset Market Clarity Act of 2025” (H.R.3633). It was passed by the House in July 2025 with a vote of 294 to 134, but has been stalled in the Senate for over a year. The bill’s core goal is to end the long-standing “dual jurisdiction” dilemma in U.S. digital asset regulation—where the same token might be targeted by both the SEC and CFTC, or neither.

The bill’s regulatory philosophy does not build a new framework but relies on existing principles to delineate boundaries. Specifically: sufficiently decentralized digital assets that no longer depend on a single issuer are classified as “digital commodities,” primarily regulated by the CFTC; while early-stage assets with clear financing attributes are regulated by the SEC, responsible for IPOs, disclosures, and investor protection. Intermediaries such as exchanges, broker-dealers, and market makers are subject to unified registration and conduct standards. This framework aims to provide institutional investors with a predictable compliance environment and end years of regulatory uncertainty driven by enforcement rather than regulation.

However, during Senate proceedings, the controversy shifted rapidly from asset classification and jurisdiction to a more specific and sensitive issue—the stablecoin yield provisions.

Why has the stablecoin yield clause become the core battleground?

The controversy over stablecoin yields is not about whether stablecoins can exist, but whether the yields generated by their reserve assets can be distributed to users. Currently, stablecoin issuers typically allocate reserves into short-term U.S. Treasuries and repurchase agreements to earn interest, which is then indirectly distributed to users via trading platforms or ecosystem partners as “rewards” or “rebates.” This creates a “pseudo-interest transmission chain” that avoids direct interest payments and regulatory restrictions, while maintaining the appeal of stablecoins for capital.

However, the Senate’s revised draft imposes substantive restrictions. According to disclosed draft text, digital asset service providers and their affiliates will be prohibited from offering yields on stablecoin balances or any arrangements that are economically or functionally equivalent to bank deposit interest. This means the “yield penetration” pathway will face systemic constraints, not just formal compliance adjustments. Incentive mechanisms based on activity (such as loyalty rewards, trading incentives, platform usage rewards) will still be permitted, but the SEC, CFTC, and Treasury will jointly develop rules to define which activities qualify as legitimate incentives and which constitute “economically equivalent” indirect interest.

The significance of this clause lies in its attempt to draw a clear legal boundary between stablecoins as “payment tools” and as “savings products.” Once enacted, stablecoins will be repositioned as payment and settlement instruments rather than on-chain savings products.

Why does the banking industry strongly oppose the yield clause?

The banking industry’s opposition is not rooted in technical regulatory disagreements but in a structural threat to their business models. Their core argument is that if stablecoin platforms can pass on reserve interest to users as yields, it effectively creates a product similar to bank deposits without the need to bear capital, liquidity, or consumer protection requirements.

The American Bankers Association has warned that potential deposit outflows could reach up to $6.6 trillion. The Independent Community Bankers of America (ICBA) estimates that if stablecoin yields are permitted, community bank deposits could decrease by about $1.3 trillion, with loans shrinking by approximately $850 billion. More critically, since most stablecoin reserves are currently invested in Treasuries and similar instruments, only a tiny proportion remains as deposits in banks, making regional banks particularly vulnerable to structural pressures from these shifts.

The banking sector attempts to counter with empirical data. A report released by the White House Economic Advisors on April 8 states that banning stablecoin yields would only increase bank lending by about $2.1 billion (roughly 0.02%) and would impose a net consumer cost of about $800 million. The banking industry then commissioned economist Andrew Nigrinis to challenge these conclusions, emphasizing that as the stablecoin market surpasses $300 billion, related risks will grow non-linearly. The Consumer Bankers Association explicitly warns that any form of yield distribution—even limited activity incentives—could erode the traditional deposit base.

As of April 20, 2026, the total stablecoin market cap exceeded $315 billion, with USDT at about $184 billion and USDC expanding with a circulation of approximately $75.3 billion and an annual growth rate of 73%. This scale of funds makes it impossible for traditional banks to ignore the potential impact of stablecoin yield provisions.

What does the evolving stance of Coinbase and Circle indicate?

Coinbase’s position shift is a notable indicator in the legislative process. In January 2026, Coinbase CEO Brian Armstrong publicly withdrew support for the CLARITY bill, stating that the Senate’s revised version was “worse than the status quo,” mainly due to de facto tokenized stock bans, restrictions on DeFi, and amendments that could stifle stablecoin rewards. However, on April 10, 2026, after Armstrong saw Bessent publicly promote the bill, he reversed course and announced support, calling the current version a “powerful bill.”

This 180-degree change is driven by clear economic considerations. It is estimated that Coinbase’s revenue from stablecoins accounts for about 20% of its total income, and the final scope of activity incentives will directly affect this revenue stream. Coinbase Chief Policy Officer Faryar Shirzad also stated that the Senate Banking Committee is expected to review the bill within April and emphasized that stablecoin incentives are crucial for protecting consumer interests.

Circle’s situation is even more direct. In 2025, Circle’s total revenue was approximately $66k, with about $13k (around 96%) coming from reserve asset yields. After the draft bill was disclosed, Circle’s stock price dropped by about 20%. Notably, Circle does not directly pay yields to USDC holders but distributes reserve yields to partners like Coinbase. Therefore, restrictions on the yield distribution chain mainly impact demand rather than revenue structure—if incentives are squeezed, user willingness to hold USDC could decline, limiting circulation growth.

Circle is working to reduce reliance on reserve yields by building a Web3 PayFi network, but its strategic shift will take time to validate. The stance battles between these leading companies show that stablecoin yield provisions are not just regulatory technicalities but directly affect the sustainability of core business models.

Can a compromise plan satisfy both banks and the crypto industry?

The Tillis-Alsobrooks compromise is currently the most feasible legislative path. Its core design is a “bifurcation”: banning passive yield holdings on stablecoin balances but allowing activity-based incentives, including loyalty rewards, promotions, subscriptions, transaction payments, and platform usage. This approach attempts to legally distinguish between “holding to profit” savings logic and “using to earn” payment logic.

However, whether this compromise can be effectively implemented remains uncertain. First, banking lobbying has expanded from core committee members to a broader group of senators, with local industry groups like the North Carolina Bankers Association mobilizing members to directly contact senators. Second, the definition of “economic equivalence” will be jointly exercised by the SEC, CFTC, and Treasury, meaning that even if the bill passes, the rulemaking process itself will become a new battleground. Patrick Witt explicitly stated at the Solana summit that the implementation phase “will be quite contentious,” and rulemaking could span months or years.

Legislatively, Senate Banking Committee Chair Tim Scott has yet to announce a specific markup date. Multiple forecasting platforms show significant fluctuations in the probability of the bill becoming law in 2026, ranging from a low of 47% early in the year to around 69% later. If the committee fails to advance the bill in April, political factors related to midterm elections could delay legislation until the remainder of 2026 or push it into 2027.

How will the bill’s passage or failure affect the stablecoin market landscape?

If the CLARITY bill ultimately passes, the stablecoin yield clause will have three structural impacts on the market.

First, the fundamental growth logic of stablecoins will change. Over recent years, their rapid expansion has been driven by two main demands—on-chain settlement and cross-border payments, and the need to park low-volatility funds. The latter has played a significant role: the continued accumulation of balances depends on low holding costs and implicit yield expectations. Once regulators cut off the “interest-like” mechanisms, the configuration aspect of stablecoins will weaken, and the willingness to hold may decline, creating uncertainty about the pace of circulation expansion.

Second, yield opportunities will shift back to traditional banks, money market funds, and regulated financial products. Native crypto platforms’ competitive advantage in yield returns will be greatly diminished, and DeFi protocols relying on stablecoin yields will face direct regulatory constraints. Analysts suggest that decentralized finance protocols like UNI and AAVE, which depend on stablecoin yield mechanisms, could be among the first affected.

Third, the business models of stablecoin issuers will diverge. USDT, dominated by offshore markets, derives profits not from yield sharing but from other sources, so its impact will be limited. USDC relies on reserve yields and distribution channels, so demand-side effects will be more pronounced. New stablecoins that focus on yield redistribution as a core competitive strategy will face the most direct business model challenges.

If the bill fails to pass in 2026, the jurisdictional ambiguity between the SEC and CFTC will persist, and the pattern of institutional investors remaining on the sidelines will continue. JPMorgan has viewed the bill’s passage as a potential positive catalyst for the digital asset market in the second half of 2026, especially for large institutional funds awaiting regulatory clarity.

Summary

The legislative process for the CLARITY Act has entered a decisive window in 2026. The White House and Trump’s joint pressure have altered the bargaining chips, but the battle over stablecoin yield provisions is far from over. The fundamental disagreement between banks and the crypto industry is not about regulatory technicalities but about the flow of trillions of dollars and the restructuring of financial intermediation functions. The Tillis-Alsobrooks compromise offers an immediate political pathway, but the implementation of rules after passage will trigger a new round of negotiations. Regardless of the outcome, the CLARITY Act will mark a watershed in U.S. digital asset regulation—it not only delineates the jurisdictional boundaries between the SEC and CFTC but also will reshape the fundamental positioning of stablecoins: as either a payment infrastructure or a yield-bearing savings tool. The answer to this question will gradually emerge over the coming weeks.

FAQ

Q: What is the difference between the CLARITY Act and the GENIUS Act?

The GENIUS Act, signed into law in July 2025, primarily establishes federal reserve and redemption rules for payment-type stablecoins. The CLARITY Act builds on this by further structuring the digital asset market, clarifying SEC and CFTC jurisdiction, and addressing disclosure and incentive functions related to stablecoins.

Q: What are the specific contents of the Tillis-Alsobrooks compromise plan?

The core is a “bifurcation”: banning passive yield on stablecoin balances (i.e., users cannot earn any economic return solely by holding stablecoins), but allowing activity-based incentives, including loyalty rewards, promotions, subscriptions, transaction payments, and platform usage. The SEC, CFTC, and Treasury will jointly develop rules to define legitimate incentives and the boundaries of “economically equivalent” interest.

Q: How will this bill affect ordinary stablecoin holders?

If enacted as currently drafted, ordinary holders will not be able to earn yields simply by holding stablecoins. Some platforms may continue to offer indirect incentives through activity-based rewards (like trading bonuses or loyalty programs), but these will be strictly limited. The configuration role of stablecoins will be weakened, emphasizing their function as payment and settlement tools.

Q: How will the SEC and CFTC’s regulatory authority be divided after the bill?

The CLARITY Act will bring most spot trading of qualified tokens under CFTC regulation, while the SEC will continue to oversee IPOs, disclosures, and investor protection. Highly decentralized assets like Bitcoin will be classified as “digital commodities” under CFTC jurisdiction; early-stage financing assets will be regulated as securities by the SEC.

Q: What is the fundamental reason for the banking industry’s opposition to the stablecoin yield clause?

The core concern is about fair competition. Banks must bear capital, liquidity, and deposit insurance costs, while stablecoin platforms could offer yields without these regulatory burdens, creating a structural competitive disadvantage. Banks argue that “the same risk should be subject to the same regulation,” and if stablecoin yield provisions are not restricted, it could accelerate the shift of deposits from traditional banks to on-chain assets.