US banks believed the GENIUS Act had settled the stablecoin yield issue when it was signed in July 2025. The law barred stablecoin issuers from paying yield on their tokens, a provision banks had pushed for. But the text did not apply the same restriction to exchanges. Within months, Coinbase was offering roughly 4% on USDC and Kraken about 5%, while Chase was paying 0.01% on deposits.
That gap quickly turned into a political fight. The Blockchain Association, which represents 125 companies including Coinbase, Kraken and a16z, later told the Senate that Congress had intentionally preserved the ability of platforms to offer rewards. Banks described it as a loophole. The Federal Reserve did not appear to catch the shift in time. In a November speech, Fed Governor Stephen Miran said there was little prospect of broad deposit flight from the domestic banking system because stablecoins do not offer yield, even though those programs were already live.
Deposit flight fears became the banking industry’s main argument
Bank executives and trade groups then put numbers behind the threat. Bank of America’s CEO said as much as $6 trillion in deposits could leave US banks for stablecoins. The Fed’s own modeling showed that under a high-adoption scenario, reduced lending capacity could reach $1.26 trillion. More than 3,200 bankers signed letters to Congress, and the American Bankers Association made closing the gap its top legislative priority.
Congress answered with the CLARITY Act, which would extend the yield ban to all digital asset service providers. In January, Coinbase withdrew its support and the Senate vote was delayed. The White House later stepped in to broker talks and set a March 1 deadline, but no agreement emerged by that date.
Compromise language failed to end the dispute
On March 20, Senators Tillis and Alsobrooks announced a compromise: passive yield would be banned, while activity-based rewards would remain allowed. Markets immediately treated that as a win for the banking sector. This week, though, Coinbase rejected the draft again, telling Senate offices it could not support language banning yield “directly or indirectly” or anything “economically equivalent to bank interest.”
The conflict remains unresolved because Washington is split on the desired outcome. Banks want exchange-based yield programs shut down. The Treasury sees stablecoins as a growing source of demand for US government debt. Treasury Secretary Bessent expects stablecoins to generate $2 trillion in demand for Treasuries, while Tether already holds more than $130 billion in Treasuries, more than Germany. Senator Lummis said negotiators are targeting committee action by the end of April.