The tug-of-war over stablecoin regulation: The landscape of the GENIUS Act implementation and the controversy over CLARITY Act benefits

On July 18, 2025, the U.S. President signed the “Guidance and Establishment of the U.S. Stablecoin National Innovation Act,” known as the GENIUS Act, marking the first time the United States established a comprehensive regulatory framework at the federal level for payment-based stablecoins. Since then, regulatory agencies such as the Office of the Comptroller of the Currency (OCC), the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), and the Office of Foreign Assets Control (OFAC) have continued to advance implementation rules. The OCC’s public comment deadline has been set for May 1, 2026, and the GENIUS Act’s effective date will be either January 18, 2027 or 120 days after the final implementation rules are issued, whichever comes first.

However, the regulatory story of stablecoins has not ended here. A seemingly simple legal question—whether stablecoin holders can earn yield—is dragging the next phase of U.S. crypto legislation into a long, drawn-out game. The protagonists of this game are not the traditional face-off between crypto companies and regulators, but a direct clash between the traditional banking industry and the crypto sector. A banking coalition led by the American Bankers Association (ABA) is working hard to block the stablecoin yield provisions in the CLARITY Act on the grounds of “deposit outflows,” causing this comprehensive crypto market structure bill—passed in the House of Representatives by 294 votes to 134—to stall in the Senate, with review repeatedly postponed until May 2026.

Regulatory Tug-of-War Under Two Tracks Running in Parallel

Current U.S. crypto legislation shows a “two-track” approach: one track is implementing the GENIUS Act, as regulators accelerate the construction of a federal stablecoin regulatory framework; the other track is advancing the CLARITY Act, which aims to establish a market structure system covering all digital assets, but has stalled because the stablecoin yield provisions have met strong opposition from the banking industry in the Senate. The gap in pace between the two tracks is creating new policy uncertainty.

Legislative Process: Two Parallel Timelines

The following are key time points for the two bills, presented in a table:

Institutional Dissection: Side-by-Side Comparison of the Core Architecture of the Two Bills

Key Points of the GENIUS Act Framework

The GENIUS Act’s core design is built around the following elements:

Issuer Qualifications: The bill provides three legal pathways for issuing stablecoins—subsidiaries of insured depository institutions, federal qualified payment stablecoin issuers approved by the OCC, and state qualified payment stablecoin issuers approved by state regulators. Issuers with an issuance size of $10 billion and below may choose the state regulatory pathway; those exceeding that size must accept federal regulation.

Reserve Requirements: Issuers must maintain 1:1 reserves, using U.S. dollars or other assets with equivalent liquidity as collateral. On a monthly basis, issuers must publicly disclose reserve details and redemption policies.

Prohibition on Paying Interest: Section 4(a)(11) of the GENIUS Act explicitly prohibits stablecoin issuers from paying interest to holders, reflecting Congress’s legislative intent that stablecoins should primarily serve as payment tools rather than substitutes for bank deposits.

Anti-Money Laundering (AML) Compliance: Stablecoin issuers are treated as financial institutions and must comply with the AML requirements of the Bank Secrecy Act. On April 8, 2026, FinCEN and OFAC jointly released a rules proposal to bring licensed payment stablecoin issuers into the AML and sanctions compliance framework.

Effective Time: All federal regulators must issue implementation rules by July 18, 2026; the act officially takes effect on January 18, 2027, or 120 days after the final rules are published (whichever is earlier).

Key Points of the CLARITY Act Structure

The CLARITY Act’s scope is far broader than that of the GENIUS Act. Its core objectives include:

• Defining the regulatory boundaries between the SEC and the CFTC, placing spot digital commodity markets under CFTC-exclusive jurisdiction
• Establishing a three-category classification system for digital assets (digital commodities, payment stablecoins, and restricted digital assets)
• Creating a “Crypto-Regulation” exemption pathway for “auxiliary assets,” allowing issuers to raise up to $50 million in financing each year
• Protecting the rights to self-custody wallets and distinguishing between decentralized and non-decentralized DeFi protocols
• Imposing restrictive provisions on stablecoin yields

Key Data Milestones

• OCC rule proposal public comment deadline: May 1, 2026
• GENIUS Act rulemaking deadline: July 18, 2026
• Stablecoin market size (as of April 2026): approximately $317 billion
• CEA-estimated total cost of a comprehensive yield ban: consumers’ annual loss of about $800 million, with bank loan increment of only $2.1 billion (0.02%)

Contest Camp Clashes: Three Forces Taking Positions

Around the stablecoin yield issue, the market has formed three clear camps of viewpoints:

Banking Industry—Centered on “Deposit Outflows”

A banking coalition led by the American Bankers Association (ABA) argues for a “strict lock-down type of ban” on paying any form of yield on stablecoins. Its core logic chain is: if crypto platforms can offer yields to stablecoin holders, users will move bank deposits to crypto platforms → the bank deposit base shrinks → banks’ lending capacity declines → it harms local economies.

ABA has placed “closing the stablecoin loophole” advertisements in Washington, citing a letter signed by more than 3,200 bankers, warning that permissive yield provisions could trigger large-scale deposit migration. The banking side further demands that the CLARITY Act draft clearly prohibit rewards paid through affiliated parties or third-party partners—for example, token incentives distributed through exchanges or platforms.

The White House and the Crypto Industry—Innovation and Consumer Interests as a Defensive Line

The White House Council of Economic Advisers (CEA) released a 21-page analysis report in April 2026, directly challenging the banking industry’s core argument. The report’s conclusion is that a comprehensive ban on stablecoin yields would only increase banks’ total loans by about $2.1 billion, equivalent to 0.02% of the total outstanding loan balance; additional lending capacity for community banks would be only about $500 million, an increase of 0.026%. At the same time, the ban would impose a net cost of about $800 million on consumers.

The Treasury Secretary and the SEC Chair have both publicly called on Congress to pass the CLARITY Act. Coinbase CEO Brian Armstrong had previously blocked the bill’s progress due to the yield provisions, but changed his stance on April 9, 2026 and said he supports it. Patrick Witt, Executive Director of the White House Crypto Council, publicly criticized the banking industry’s ongoing lobbying efforts.

Think Tanks and Academic Institutions—Distinguishing “Issuer Interest” From “Platform Rewards”

The Cato Institute’s position provides a third perspective. It argues that the two types of yield payments should be clearly distinguished: what the GENIUS Act bans is the stablecoin issuer’s direct payment of interest, but independent rewards determined and provided by third-party platforms should not be banned along with it. The institute also cites research from Cornell University showing that deposit outflows are not necessarily an outcome; increased competition may in fact prompt banks to raise deposit interest rates.

Chain Reactions: Industry Impacts From the Divergence in the Two Bills’ Processes

Direct Impact on Stablecoin Issuers

The implementation of the GENIUS Act will have structural reshaping effects on the stablecoin market:

Compliance Costs Rise Significantly: The OCC’s rule proposal requires issuers to establish comprehensive prudential management systems, including bank-level regulatory requirements such as capital adequacy, liquidity management, and risk management. For stablecoin projects that previously operated in regulatory gray areas, these compliance costs cannot be ignored.

Size Limits on the State Pathway: Issuers with an issuance size of $10 billion and below may choose the state regulatory pathway, but once the size grows, they must transition to federal regulation. This design preserves flexibility for small and medium stablecoin projects, but also sets a growth ceiling.

Admission Conditions for Foreign Issuers: If foreign stablecoin issuers want their stablecoins to circulate in the U.S., they must go through U.S. digital asset service providers, and the Treasury must determine that they are subject to equivalent foreign regulatory regimes.

Indirect Impacts on Crypto Market Structure

The delay in the CLARITY Act is causing notable chain reactions:

Regulatory Vacuum Persists: In the absence of a clear legislative framework, the SEC and CFTC’s jurisdictional boundary remains dependent on administrative interpretation rather than legal basis. This condition makes it difficult for institutional capital to enter the crypto market at scale.

Legislative Window Narrows: Senator Bernie Moreno has warned clearly that if the bill does not enter a full Senate vote before May, the midterm election cycle will make major legislation politically untouchable, and digital asset regulation may have to wait until the next Congress. Polymarket’s probability forecast for CLARITY Act passage in 2026 has fallen from 82% in February 2026 to about 60%.

Divergence in Regulatory Timing: The OCC is accelerating the construction of a stablecoin regulatory framework, while broader market-structure legislation has stalled due to banking industry lobbying. This speed gap between the two could create new regulatory arbitrage space.

Long-Term Impacts on Traditional Banking

The long-term impacts of this game on traditional banking are also worth attention. Behind the banking industry’s strong resistance to stablecoin yield provisions is a defensive posture to protect its core business model—supporting lending with low-interest deposits. However, historically, similar strategies have not had optimistic results. The 1933 Q Regulation prohibited paying interest on checking accounts, which led to the emergence of the $7.6 trillion money market fund industry; these funds provide products with functions equivalent to those of deposits through different packaging. Whether banning stablecoin yields can truly stop deposits from migrating to higher-yield products is a question that remains to be validated over time.

Conclusion

The progress gap between the GENIUS Act and the CLARITY Act reflects a structural contradiction in the U.S. crypto regulatory process: because stablecoins are directly tied to the U.S. dollar, they have been the first to draw legislative attention and receive a regulatory framework. However, when it comes to broader issues such as digital asset categorization, exchange regulation, and DeFi compliance, the interest landscape facing lawmakers is far more complex, and the difficulty of advancing legislation rises exponentially.

The banking industry’s strong opposition to the stablecoin yield provisions is, in essence, a defense of its traditional deposit business model. Yet, in an era where technological change and financial innovation are accelerating, using prohibitive provisions to maintain the sustainability of existing business models is a proposition that needs to be re-examined. The historical experience of the 1933 Q Regulation and the money market fund industry shows that the market always finds functional alternatives.

Over the next several weeks through May 2026 will be a critical window for observing where this game goes. No matter the outcome, the establishment of the stablecoin regulatory framework and the contest over market structure legislation will profoundly shape the trajectory of the crypto industry in the coming years.