The CLARITY Act is at a standstill after talks between the White House, banks, and major exchanges collapsed. The banks continue to push for stablecoins to be unable to offer returns to their users.
Recent negotiations have centered on whether stablecoins should be strictly limited to payment functions or allowed to offer interest or other benefits to holders. Banking groups have lobbied lawmakers to veto any financial or non-financial incentives linked to stablecoins, stalling the CLARITY Act.
Their argument is clear: allowing yields could incentivize the migration of deposits out of the traditional banking system, affecting stability and lending capacity.
On the other hand, representatives of the crypto industry maintain that yields are not an add-on, but a core driver of adoption and liquidity, especially in the DeFi ecosystem and on exchanges. Some companies have shown openness to partial compromises, but reject a total ban. In their view, such a measure would erode the international competitiveness of stablecoins issued in the United States.
Regulatory paralysis, importance of the CLARITY Act, and effects on the on-chain economy
The stagnation surrounding the CLARITY Act has prolonged regulatory ambiguity for companies developing dollar-based on-chain infrastructure. Without a definitive framework, many firms face difficulties planning launches, structuring products, and forging strategic alliances with institutional counterparties.
Furthermore, regulatory uncertainty could directly impact liquidity. If performance mechanisms are restricted, protocols sensitive to capital flows could experience reduced demand. Simultaneously, the lack of clarity could accelerate the relocation of operations to jurisdictions with more defined and permissive regulations.
The discussions are also intertwined with the GENIUS Act, enacted in July 2025, whose implementation rules are due by July 2026. This timeline adds political pressure: regulators must decide whether to move toward a more restrictive performance-based framework or adopt a more flexible one that allows for innovation in on-chain financial products without compromising systemic stability.
In practical terms, the impasse leaves three main risks for the market. First, uncertain regulatory compliance will likely delay new products and strategic partnerships. Second, business models that rely on performance as an incentive could see their user base eroded. And third, the US position in the dollar-based digital economy could weaken if companies and capital migrate to other regulatory environments.
