CLARITY Act Stablecoin Yield Language Delayed as Banking Groups Raise Concerns

Senator Thom Tillis has delayed releasing the latest stablecoin yield provisions for the CLARITY Act as banking groups and the crypto industry continue clashing over whether stablecoins should be allowed to offer rewards on idle holdings. Banking groups, including the American Bankers Association and North Carolina Bankers Association, are lobbying senators to impose an airtight ban on stablecoin rewards, warning of potential trillions in deposit outflows from traditional banks. The White House Council of Economic Advisers countered that deposit flight risks are quantitatively small, with crypto advisor Patrick Witt accusing banks of greed and urging them to accept the Tillis-Alsobrooks compromise reached last month. With an April markup now highly unlikely and Polymarket odds falling from 64% to 48%, optimism for the CLARITY Act passing this year continues to fade.

Banking Industry Opposition to Stablecoin Yield Provisions

• ▪The American Bankers Association stated that the White House report on stablecoin yield focused on the wrong question
• ▪The North Carolina Bankers Association urged members to call Senator Thom Tillis' office to push for an airtight prohibition of stablecoin rewards in the CLARITY Act

White House and Senate Negotiations on CLARITY Act Language

• ▪White House crypto advisor Patrick Witt urged the banking industry to move on rather than dwell on the risk of stablecoin rewards to bank deposits
• ▪The White House Council of Economic Advisers stated that concerns over the risk that stablecoin yields posed to bank deposits were quantitatively small
• ▪White House crypto advisor Patrick Witt stated it is hard to explain further lobbying by banks on stablecoin yield as motivated by anything other than greed or ignorance
• ▪Senator Thom Tillis and Senator Angela Alsobrooks reached a deal with the White House last month over language text to settle the clash between banking and crypto parties
• ▪White House crypto advisor Patrick Witt stated that the compromise reached by Senators Tillis and Alsobrooks addresses concerns about deposit flight head-on

Declining Prospects for CLARITY Act Passage

• ▪Polymarket odds for the CLARITY Act passing fell from a recent high of 64%
• ▪The Senate Banking Committee is set to hold a hearing on Fed Chair nominee Kevin Warsh's confirmation next week

Perspective of Banking groups (American Bankers Association and North Carolina Bankers Association)

• ▪The American Bankers Association believes the White House stablecoin yield report asked the wrong question by focusing on banking lending rather than deposit risk

Perspective of White House (Biden administration crypto policy team)

• ▪White House crypto advisor Patrick Witt characterized continued banking lobbying on stablecoin yield as motivated by greed or ignorance
• ▪The White House Council of Economic Advisers concluded that stablecoin yields pose only quantitatively small risks to bank deposits

Perspective of Senator Thom Tillis

• ▪Senator Thom Tillis reached a deal with the White House last month on stablecoin yield language text alongside Senator Angela Alsobrooks

Perspective of Crypto industry

• ▪Crypto traders on Polymarket give only 48% odds that President Donald Trump will sign the CLARITY Act into law in 2025