A high-stakes legislative battle has erupted at the White House as major U.S. banks and crypto industry leaders clash over a proposed ban on stablecoin interest and rewards. The outcome of these negotiations will determine the fate of the CLARITY Act 2026, the first comprehensive federal framework for digital assets in the United States. Following a tense, inconclusive meeting on February 10 led by Patrick Witt, Executive Director of the President's Crypto Council, the administration has set a strict March 1 deadline to break the impasse.
Banks vs. Crypto: The Battle Over Stablecoin Yield
At the heart of the deadlock is a fierce disagreement over stablecoin yield regulation. Traditional financial institutions, represented by giants like Bank of America and JPMorgan Chase, are demanding a total legislative ban on stablecoin rewards. Their argument is rooted in financial stability: they warn that if digital dollar substitutes like USDC can offer high-yield rewards (often 3-5% or more), they will siphon trillions of dollars away from traditional bank deposits, destabilizing the lending economy.
On the other side, crypto industry titans, including Coinbase CEO Brian Armstrong and the Digital Chamber, argue that a blanket stablecoin rewards ban would stifle innovation and kill the U.S. crypto market's competitiveness. They contend that rewards for activities like staking or liquidity provision are essential for the ecosystem's growth and are not functionally identical to bank interest.
The Digital Chamber's Failed Compromise
In a bid to save the legislation, the Digital Chamber released a set of new principles on February 14, offering a significant concession: they would agree to prohibit "idle" yield—payments made simply for holding a token, similar to a savings account. However, they drew a hard line at preserving rewards for active participation, such as DeFi liquidity provision. According to sources close to the negotiations, banking representatives rejected this offer, sticking to their demand for a comprehensive prohibition outlined in their "Yield and Interest Prohibition Principles" document.
CLARITY Act 2026 and the GENIUS Act Connection
The current standoff threatens to derail the CLARITY Act 2026 (Digital Asset Market Clarity Act), which passed the House in July 2025 but remains stalled in the Senate Banking Committee. The bill is intended to work in tandem with the GENIUS Act implementation—the Guiding and Establishing National Innovation for U.S. Stablecoins Act, signed into law by President Trump in July 2025.
While the GENIUS Act established a regulatory framework for payment stablecoin issuers, it left loopholes regarding rewards offered by third parties or affiliates. Banks are now using the CLARITY Act negotiations to close these gaps. If the CLARITY Act fails to pass by the spring recess, industry analysts fear that comprehensive US crypto regulation updates could be delayed until after the 2026 midterms, leaving the market in a prolonged state of uncertainty.
SEC Chairman Paul Atkins Pushes for Resolution
Amidst the deadlock, SEC Chairman Paul Atkins has emerged as a key voice urging compromise. Testifying before the Senate Banking Committee on February 11, Atkins emphasized that "rules without legislation aren't future-proof." He signaled that the SEC, in collaboration with the CFTC under their joint "Project Crypto" initiative, is ready to implement the new market structure immediately upon passage.
Atkins, who has shifted the agency's focus away from regulation-by-enforcement, warned that without the statutory backing of the CLARITY Act, the U.S. risks falling behind global competitors who have already established clear digital asset frameworks. His testimony highlighted that while the SEC can offer interim guidance, only Congress can provide the permanent certainty needed to make the U.S. the "crypto capital of the world."
What's Next: The March 1 Deadline
With the White House crypto meeting failing to produce a deal, the pressure is mounting. The administration has made it clear that it wants a resolution before March 1 to ensure the bill can move to a Senate vote this spring. If banks and crypto firms cannot find common ground on the stablecoin yield issue, the White House may be forced to intervene directly or risk seeing its signature financial innovation agenda stall.
