A breakthrough agreement involving Coinbase Global Inc. has revived momentum for long-delayed US crypto legislation. This comes after lawmakers reached a compromise on one of the most contentious issues in the debate, stablecoin yield rewards.
Coinbase Chief Legal Officer Paul Grewal had initially framed the CLARITY Act as critical unfinished business following the passage of the GENIUS Act last year. He called it a “watershed” moment for the crypto industry.
The GENIUS Act established a regulatory framework for stablecoins. Still, it left a gap in the market structure. The CLARITY Act is expected to fill that by drawing clear jurisdictional lines between the SEC and CFTC for digital assets.
The debate over whether crypto exchanges should be allowed to offer rewards on stablecoin holdings had previously derailed the bill earlier this year. Traditional banks lobbied for a full ban, warning that such incentives could trigger deposit outflows from the conventional banking system.
“In the end, the banks were able to get more restrictions on rewards, but we protected what matters – the ability for Americans to earn rewards, based on real usage of crypto platforms and networks,” said Faryar Shirzad, chief policy officer at Coinbase, in a post on X.
The compromise may now pave the way for broader crypto market structure legislation to advance to a vote in the Senate Banking Committee. The proposed bill aims to clearly define the regulatory roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission across different segments of the digital asset industry.
Will banks and crypto firms finally agree on stablecoin rewards rules?
The stablecoin yield provision of the CLARITY Act has been the biggest barrier to its progress since the Senate Banking Committee pulled a scheduled markup in January. At the center of this battle is a basic conflict between old school finance and the crypto industry over whether to allow rewarding stablecoin holdings, and with what conditions.
The banks’ charge has been that allowing crypto platforms to offer yield on stablecoin balances could prompt the draining of deposits from the traditional banking system, potentially undermining financial stability.
Crypto companies, including Coinbase Global Inc., have argued that limiting rewards would negatively impact consumers and undermine competition in a fast-changing digital asset landscape. Under a bipartisan principle, a compromise reached on March 20 by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) banned passive yield on idle stablecoin balances, but permitted activity-based rewards based on payments, transfers, and platform usage.
But Coinbase then spurned the draft language crafted on March 23, citing the possibility that the restriction was too broad and that legitimate consumer benefits could also be thwarted. And yet, following that setback, a few comments from Coinbase executives have indicated a good pace of negotiations, with significant progress on both sides — although the exact terms of any deal for either party remain unresolved.
Is May the final window for the CLARITY Act to pass?
On related development, Ripple CEO Brad Garlinghouse said at $XRP Las Vegas that he expects the CLARITY Act will pass by the end of May. This is his third public deadline for the bill after predicting 80% odds of April passage on Fox Business in February before shifting his expectations to May at two consecutive industry events.
Reports indicate that Garlinghouse is betting the bill clears the Senate Banking Committee, passes the Senate floor, and reaches Trump’s desk before the Memorial Day recess on May 21. “When people are at their peak of frustration, that’s when they finally compromise, and it gets done. I think we’re there,” Garlinghouse said.
Lawmakers themselves have also framed the moment as unusually time-sensitive. Cynthia Lummis wrote on X in April that this represents “our last chance to pass the Clarity Act until at least 2030.”
Bernie Moreno has made similar remarks, stating the point more directly. Both lawmakers argue that the current legislative window is unusually tight, given the rare alignment between the House, Senate, and White House on crypto policy, a balance that could easily shift after the next midterm elections.
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