Stablecoin yield fight threatens to sink CLARITY Act as Coinbase and White House clash

The long-awaited effort to establish a comprehensive federal framework for stablecoins, often championed in legislative proposals such as the CLARITY Act, is teetering on the brink of collapse due to a fundamental dispute over interest-bearing digital assets. The core conflict pits the White House and federal regulators, who advocate for strict limitations or outright bans on stablecoin yield, against major industry players like Coinbase, who view yield as essential for market competitiveness and innovation.

Administration officials, primarily from the Treasury Department and the Federal Reserve, are deeply concerned that stablecoin yield products mimic unregistered securities or traditional bank deposits, creating systemic risk without adequate consumer protections or reserve requirements. They argue that permitting high yields incentivizes risky behavior and could destabilize the broader financial system if issuers fail to meet redemption demands. The regulatory push favors treating stablecoin issuers like tightly supervised banks, effectively eliminating most yield opportunities unless specifically regulated as insured deposits.

Conversely, Coinbase and other digital asset firms assert that yield is a necessary component of the digital asset ecosystem, allowing U.S. stablecoins to compete with offshore decentralized finance (DeFi) platforms that routinely offer staking or lending returns. The industry insists that a tailored regulatory approach—rather than outright prohibition—is feasible, allowing for innovation while managing risk through transparent attestations and reserve segregation.

This ideological chasm has created a significant hurdle in Congress. Legislators attempting to finalize the stablecoin bill are struggling to reconcile regulatory mandates insisting on bank-like oversight with industry demands for operational flexibility. The inability to bridge the gap over the definition and treatment of yield products is threatening to paralyze the legislative process entirely, raising fears that the CLARITY Act (or its successor bills) will fail to pass before the end of the legislative session, leaving the U.S. stablecoin market mired in regulatory uncertainty.

Source: Stablecoin yield fight threatens to sink CLARITY Act as Coinbase and White House clash