WASHINGTON, D.C. – May 2025 – In a significant move to break a legislative deadlock, U.S. cryptocurrency firms have formally proposed a new compromise on the contentious issue of stablecoin rewards within the pivotal market structure bill known as the CLARITY Act. This development, first reported by Bloomberg, represents a potential turning point in the years-long struggle to create a coherent federal regulatory framework for digital assets. The proposal specifically addresses one of the most debated points: whether and how firms can offer interest or yield on dollar-pegged stablecoins, a practice that traditional banks view as a direct threat to their deposit base. Consequently, this stablecoin rewards debate has become the central hurdle for the CLARITY Act’s progress.
The Core of the Stablecoin Rewards Compromise
The proposed compromise centers on two interconnected mechanisms designed to appease both the crypto industry and the established banking sector. First, it seeks to simplify the regulatory pathway for regional and community banks to become direct issuers of payment stablecoins. This provision directly addresses banking industry concerns about being sidelined by fintech and crypto-native entities. Second, and more critically, the proposal includes a mandate that would require stablecoin issuers—including non-bank entities—to deposit a significant portion of their reserve assets with these qualifying U.S. banks.
Industry analysts immediately recognized the strategic logic. “This isn’t just about stablecoin compensation; it’s about integration,” noted a financial policy expert from the Brookings Institution. “By tethering stablecoin reserves to the traditional banking system, the proposal creates a symbiotic relationship. Banks gain a new, potentially substantial source of low-cost deposits, while crypto firms gain regulatory legitimacy and a clearer operational runway.” This structure could theoretically allow banks to share a portion of the interest earned on those reserves back to the issuers, who could then offer a form of reward to stablecoin holders, all within a regulated framework.
Banking Sector Concerns and the Stakes of Negotiation
Despite the proposal, a final agreement remains elusive. The banking industry, led by groups like the American Bankers Association, has consistently voiced deep concerns. Their primary argument is that if major crypto exchanges like Coinbase or dedicated stablecoin issuers like Circle were permitted to offer competitive yields on what are essentially digital dollar equivalents, it could trigger massive outflows of customer deposits from traditional savings and checking accounts.
“This is a fundamental question of financial stability and market fairness,” a senior banking lobbyist explained in a recent congressional hearing. “Unregulated entities offering bank-like services without adhering to bank-level capital, liquidity, and compliance standards creates an uneven playing field and systemic risk.” The fear is that a high-yield stablecoin could act as a vacuum, pulling deposits from the regulated banking system into a less-regulated shadow financial system, potentially undermining credit creation and monetary policy transmission.
- Customer Fund Competition: Banks worry about competing for deposits without the same regulatory constraints.
- Regulatory Arbitrage: Concerns that crypto firms might operate under lighter rules for similar services.
- Systemic Linkages: The proposal intentionally creates linkages, which could spread risk.
The Political Pathway and Key Figures
Negotiations are actively progressing on two parallel tracks: within the relevant committees of Congress and through coordinated discussions facilitated by the White House. This dual-track approach underscores the bill’s political priority. U.S. Senate Banking Committee Chairman Tim Scott has maintained a publicly optimistic stance. In a statement last week, he remarked, “The CLARITY Act has the potential to be the foundational piece of legislation that brings certainty to the digital asset ecosystem while protecting consumers and our financial system. We are closer than ever to a balanced solution.”
His optimism appears partly rooted in a recent private meeting among Senate Democrats, which was described by participants as “productive” and “forward-moving.” The involvement of key Democrats is crucial for any bipartisan bill to advance. The timeline is also a factor; with a presidential election year approaching, there is a recognized window of opportunity to pass substantial legislation before the political calendar becomes dominated by campaigning.
Historical Context and the Road to the CLARITY Act
The current debate over stablecoin rewards is the latest chapter in a much longer saga. The need for a comprehensive market structure bill became glaringly apparent after the crypto market turmoil of 2022, which highlighted regulatory gaps concerning consumer protection, custody of assets, and the classification of digital securities. Previous legislative efforts, like the Lummis-Gillibrand Responsible Financial Innovation Act, laid important groundwork but failed to gain sufficient momentum.
The CLARITY Act (Clarity for Lending and Accounting of Digital Assets) emerged as a more focused attempt to resolve specific, high-priority issues: defining the jurisdictional boundaries between the SEC and CFTC, establishing rules for crypto exchanges, and creating a federal framework for payment stablecoins. The table below outlines the evolution of key U.S. crypto regulation efforts:
| Bill/Proposal | Key Focus | Status (as of 2025) |
|---|---|---|
| Lummis-Gillibrand RFIA | Comprehensive framework, taxation, definitions | In committee, foundational |
| SEC Enforcement Actions | Applying securities laws to crypto assets | Ongoing, case-by-case |
| House Stablecoin Bill (2023) | State vs. federal issuance of stablecoins | Passed committee, stalled |
| CLARITY Act | Market structure, exchange rules, stablecoin policy | Active negotiation, closest to breakthrough |
This history shows that the stablecoin compensation issue is the final, most difficult knot to untie. Resolving it could unlock the entire bill.
Global Implications and Competitive Landscape
The outcome of these U.S. negotiations carries immense weight beyond its borders. Major financial jurisdictions like the European Union, with its implemented MiCA (Markets in Crypto-Assets) regulation, the United Kingdom, and Singapore have already moved forward with their own regulatory regimes. These frameworks often include specific provisions for stablecoins, creating a patchwork of global standards.
A clear, innovation-friendly U.S. law is seen as critical for maintaining the country’s competitiveness in financial technology. “Capital and talent are mobile,” observed a managing partner at a venture capital firm focused on blockchain. “If the U.S. cannot provide regulatory clarity, especially on something as fundamental as a digital dollar token, development and leadership will inevitably shift to other shores that do.” The proposed compromise, therefore, is not merely a domestic banking issue but a strategic decision about America’s role in the future of finance.
Conclusion
The new compromise proposal on stablecoin rewards within the CLARITY Act marks a pivotal moment in U.S. financial legislation. By creatively linking stablecoin reserve requirements to the traditional banking system, it attempts to transform a zero-sum conflict into a potential partnership. While significant hurdles remain—primarily the banking industry’s deep-seated concerns about deposit competition and regulatory parity—the active, high-level negotiations and optimistic signals from key lawmakers suggest a resolution is within reach. The passage of the CLARITY Act, with a workable solution for stablecoin compensation, would provide the certainty the digital asset industry desperately needs while aiming to safeguard the stability of the broader U.S. financial system. The coming weeks will be decisive in determining whether this compromise can bridge the gap between two competing visions of modern finance.
FAQs
Q1: What is the CLARITY Act?
The CLARITY Act is a proposed U.S. market structure bill aimed at creating a comprehensive federal regulatory framework for cryptocurrency exchanges, digital asset securities, and, most critically, payment stablecoins.
Q2: Why are stablecoin rewards so controversial?
Stablecoin rewards are controversial because traditional banks view them as unregulated competition for customer deposits. Banks argue that crypto firms offering yield on dollar-pegged stablecoins could draw funds away from the banking system without facing the same strict capital and liquidity rules.
Q3: What does the new compromise proposal entail?
The proposal has two main parts: 1) Making it easier for regional banks to issue stablecoins directly, and 2) Requiring stablecoin issuers to hold a portion of their reserves at these U.S. banks. This aims to integrate crypto with traditional finance and share benefits.
Q4: Who is involved in the negotiations?
Negotiations involve key members of the Senate Banking Committee and the House Financial Services Committee, representatives from the crypto industry and banking sector, and officials from the White House and Treasury Department.
Q5: How does this affect the average crypto user?
If passed, the CLARITY Act would bring much clearer rules for U.S.-based crypto services. It could legitimize yield-bearing stablecoin products but likely under stricter consumer protection and disclosure requirements than exist today.
Q6: What happens if no compromise is reached?
Without a compromise, the CLARITY Act will likely stall. This would prolong regulatory uncertainty for the U.S. crypto industry, potentially driving innovation and business activity to other countries with clearer regulations, and leave stablecoins in a legal gray area.
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