- Some banks and traditional financial institutions are not entirely on board with the new language on stablecoin yields in the Clarity Act.
The crypto community’s infighting took a turn for the worse as Coinbase and others rejected the stablecoin yields that banks pushed in the Clarity Act a few months ago. The crypto exchange’s walkout from the negotiations prompted the White House to intervene and mediate between the parties. Meanwhile, Ripple, the Trump administration, and several industry stakeholders urged their ranks to adopt a more pragmatic approach to the matter.
Recently, banks have already gotten their way in the debate surrounding stablecoin yields. Together with the big shots in crypto, they agreed to a compromise banning earnings from idle stablecoin holdings, which are “economically or functionally equivalent” to interest payments on bank deposits. Meanwhile, the deal allowed “activity-based rewards” on the same digital assets, such as cashbacks, loyalty, points, rebates, and others, that don’t run counter to the aforementioned condition.
However, Eleanor Terrett revealed that not everyone in the banking sector was on board with the Clarity Act’s new language, as outlined in the compromise agreement. She observed that their stance depended on their business models.
The Rift Between Banks and Lenders Over the Stablecoin Yield Compromise on the Clarity Act
Big banks with large consumer-facing products and services are still opposed to the deal, believing they could squeeze out more favorable terms under the provisions of the pending Clarity Act. On the other hand, lenders without major retail exposure supported the prevailing compromise for the sake of advancing legislation.
Most of the big banks, including their allied trade groups, have remained convinced that stablecoin yields and even the same benefits from other crypto products could cause a deposit flight. Many reiterated Bank of America’s (BOA) estimate of more than $6 trillion in capital flight to drive their point. They argued that it would eventually harm the lending industry, leading to liquidity issues and higher borrowing costs.
Senators Moving On From Stablecoin Yield Debate
Big banks are still pushing their luck on the subject of stablecoin yields. However, the Senate Banking Committee appears to have moved on from the issue. It means the matter is a done deal as far as the likes of Senators Tim Scott (R-SC), Cynthia Lummis (R-WY), Thom Tillis (R-NC), and Angela Alsobrooks (D-MD) are concerned.
As the Clarity Act proceeds for its much-awaited markup on the Senate floor, the deliberations are about to shift to other pressing concerns. These include ethical standards for elected officials, consumer protection, and illicit finance provisions under the legislation.
