The banks want our profits: The truth behind the "CLARITY Act"

Source: The Crypto Advisor, compiled by Shaw, Golden Finance

If you want to understand the current true developments in Washington, don’t pay attention to the headlines—just closely monitor the flow of funds.

It’s not congressional appropriations, nor campaign contributions—it’s yield.

Although the “CLARITY Act” has been promoted as a long-overdue bill aimed at establishing regulations and a regulatory framework for digital assets, the most heated controversy among all parties is not about defining categories or regulatory jurisdiction. It’s a more straightforward issue: who profits.

Behind the scenes, policymakers, banks, and crypto companies are all fighting over the same question—who can capture the profits generated by the U.S. dollar assets within stablecoins. As this debate unfolds in real time, what’s being reshaped is not only the regulatory rules but also a market that now directly competes with the traditional banking system, and its economic foundation will be rewritten accordingly.

From a macro perspective, the “CLARITY Act” aims to resolve a long-standing unresolved issue in the United States: clarifying the position of digital assets within the existing financial regulatory framework.

The bill does not create an entirely new framework but relies on established regulatory principles to more clearly delineate the boundaries between securities and commodities, while formally assigning regulatory authority to the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC). Assets identified as securities remain under SEC regulation, subject to disclosure, resale restrictions, and enforcement rules; commodities fall under CFTC jurisdiction, focusing on market structure and trading regulation.

As legislators state, the goal of the bill is to replace the fragmented, ambiguous regulatory landscape that has persisted for years with clear rules and accountability mechanisms. The bill aims to “establish a clear, enforceable regulatory firewall, strengthen national security, protect customers and investors, and support responsible innovation in the United States.”

This statement is crucial. After years of “regulation through enforcement,” the “CLARITY Act” marks a shift toward formal legislation, designed to reduce uncertainty, retain domestic businesses, and lay a more stable foundation for institutional participation. Or as the Senate Banking Committee has said: clear regulation protects investors; uncertainty does not.

Although the core of the bill revolves around asset classification, jurisdictional boundaries, and investor protection, the most far-reaching controversy surrounding the “CLARITY Act” is almost unrelated to these categories. It directly targets stablecoins and the yield they generate.

Jumping from policy issues to stablecoin yields may seem abrupt, but it’s not.

The “CLARITY Act” does not directly regulate yields, but once digital dollars start generating yield, they become very similar to bank deposits—and it is at this point that banks, feeling threatened, have entered the fight.

Last week, journalist Eleanor Terrett’s report fully exposed this contradiction—she obtained details of the latest draft of the bill circulating among stakeholders.

According to this draft, crypto platforms may be broadly prohibited from offering yield on stablecoins to users—both direct interest payments and any form “economically or functionally equivalent to interest” are banned. This clause applies to all exchanges, brokers, and their affiliates. It restricts platforms from designing rewards based on users’ asset balances or returning yield to users relying on yield generated from reserve assets.

Behavior-based incentives—such as loyalty rewards, usage rewards, and so forth—may still be permitted. But any form resembling deposit-like yield will fall under regulatory scope, with regulators further defining the boundaries in detail later.

At its core, all of this is quite simple: the dispute isn’t whether stablecoins can exist—it’s whether the yield generated by their reserve assets can truly be distributed to users.

Based on our research, there are roughly several feasible paths forward, each with different impacts on stablecoin adoption, issuer profit models, and capital flows:

1. Prioritize passing the “CLARITY Act,” delaying the yield issue

Lawmakers are pushing the bill based on its current version, even if restrictions related to yield are tightened in the short term. Regulatory certainty has always been a core demand of the industry. Delaying the overall framework due to a single issue carries risks. Under this scenario, stablecoins will continue expanding as infrastructure, but the yield space will be significantly limited.

2. Narrow or further refine the yield restrictions

After ongoing negotiations, “economic equivalence” will be more precisely defined, allowing some forms of yield distribution to be retained. This approach preserves stablecoins’ infrastructure-like qualities while maintaining their role as yield-generating assets. However, under pressure from the banking sector, securing any flexibility will be extremely difficult.

3. Accept a more stringent regulatory framework

Existing provisions could be implemented or even tightened further, greatly restricting platforms’ ability to offer yield based on balances. Stablecoins would revert to purely trading tools, losing one of the main incentives that have attracted capital inflows in recent years.

Another possible outcome, which is currently under-discussion but not widely recognized, is that this regulatory trajectory could reshape capital flows within the crypto industry. If stablecoins cannot offer yield, large amounts of idle capital will not just remain stagnant—they will be forced to shift toward on-chain alternatives, such as staking, decentralized finance (DeFi) lending, and borrowing.

This reallocation of capital would have profound implications. Stablecoins are among the largest low-volatility capital pools in the crypto ecosystem, with a current market size of about $300 billion. Cutting off their yield channels would effectively push funds outward. In this environment, digital assets with yield attributes will not only be more attractive but could also become one of the few remaining profitable channels.

There is a fundamental rule in the crypto industry: the further you go, the more resistance you encounter.

This time is no exception—stablecoins are never just a technological innovation; they directly challenge one of the core businesses of the banking system: the deposit business. When dollars can be transferred instantly, settled globally, and still generate yield outside the banking system, this is not merely complementary—it’s direct competition.

Banks will never stand idly by. They have strong incentives to push for stricter rules and tighter restrictions to maintain control over how dollars are stored and monetized. If their wishes are fulfilled, stablecoins are unlikely to survive in their current form and may even be entirely replaced by alternatives like central bank digital currencies (CBDCs), which are more tightly regulated and linked to the banking system.

The market does not need to fully price this in yet. Forecasts suggest that the probability of the “CLARITY Act” passing this year is about 55%, with implementation timing and final details still uncertain.

The “CLARITY Act” has advanced the regulatory dialogue, but it also makes one thing clear: this battle is far from over—it has only just begun.