Interest-ing times: Trump goes toe-to-toe with banks over CLARITY Act

Whether firms should be permitted to issue stablecoins that provide interest‑like returns has emerged as a key point of contention in Congress’s consideration of the Digital Asset Market Clarity Act of 2025 (CLARITY Act), the U.S. crypto market structure bill.

In late February, U.S. stablecoin policy has moved back into focus following a series of White House‑brokered meetings between banks and crypto industry participants, alongside a further instance of direct public intervention by President Trump.

The central issue is whether, and in what form, stablecoin interest or yield should be permitted under U.S. law. Notably, the stablecoin provisions in section 404 of the draft are largely unrelated to market structure. Instead, the proposed revisions aim to close a gap left by last year's Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS) Act). The issue has emerged as a key obstacle to passage of the CLARITY Act.

Although the debate is often presented in political terms, the underlying issues are fairly simple. The question is whether stablecoins that offer interest or rewards start to look like bank deposits, which should be regulated like banking, and how far lawmakers want to limit non‑banks from competing with traditional banks by offering returns to customers.

How are stablecoins treated under the current law?

In July 2025, Congress enacted the GENIUS Act, establishing a federal framework for “payment stablecoins,” digital assets pegged to a fixed monetary value and fully backed by high‑quality liquid assets such as U.S. currency or Treasury bills. Issuance is limited to licensed entities, which are subject to reserve, disclosure, and risk‑management requirements. Critically, the Act explicitly prohibits approved issuers from paying interest, yield, dividends or other returns to holders solely for holding a payment stablecoin.

The GENIUS Act did not, however, clearly address whether third parties, such as crypto exchanges or wallet providers, could offer rewards or incentives linked to stablecoin use. That gap has fuelled the current debate. Crypto firms argue that incentives are a legitimate tool for customer engagement, while banking groups contend that third-party yield‑bearing stablecoin arrangements closely resemble interest‑bearing deposits and risk eroding the bank deposit base. That balance has shifted following a proposed implementing rule from the Office of the Comptroller of the Currency, which suggests that these third party reward structures may be inconsistent with the statute’s intent.

Will stablecoin rewards be permitted under the CLARITY Act?

At a White House meeting on 19 February 2026, administration officials signalled support for a compromise that would allow limited stablecoin rewards under the CLARITY Act, provided they are tied to transactional use or support for crypto infrastructure, rather than passive holding. The White House reportedly urged banks to accept this compromise to allow the legislation to advance.

Banks have so far resisted. In subsequent discussions with crypto firms and White House officials, banking lobbyists have argued that the administration does not control the Senate process and have maintained that most forms of rewards should be prohibited. That position has gained traction among lawmakers from both parties, stalling progress on the CLARITY Act and raising the prospect that resolution could slip into 2027.

On 3 March 2026, President Trump publicly called on Congress to pass the CLARITY Act “ASAP,” accusing banks of seeking to undercut the GENIUS Act by blocking market‑structure reform over the stablecoin rewards issue.

Crypto negotiators have grown increasingly frustrated with what they see as the banking sector’s inflexible stance, even as digital asset firms signal a willingness to forgo rewards on stablecoins that are merely held rather than used. Industry leaders such as Coinbase CEO Brian Armstrong and Ripple CEO Brad Garlinghouse have nevertheless expressed confidence that an eventual deal remains achievable.

In the weeks ahead, attention will focus on whether targeted adjustments to stablecoin reward models are sufficient to unlock passage of the CLARITY Act, or whether the GENIUS Act will continue to define the market’s practical limits. The direction of this debate may also foreshadow discussions in Australia as stablecoins are brought within a new payments‑licensing regime.

In Australia, regulatory uncertainty and pending litigation have largely curbed the offer of yield by exchanges in any form. Upcoming regulatory reforms promise an opportunity to offer limited staking services under the AFSL framework, but it remains to be seen whether new types of yield offerings will emerge as banks and exchanges compete more closely in the years ahead.

Written by Steven Pettigrove, Katrina Sharman and Tahlia Kelly