The most important piece of crypto legislation in American history is stuck, and the White House just made it clear who it blames. On April 17, Patrick Witt, the executive director of the President’s Council of Advisors for Digital Assets and the White House’s top crypto official, accused the traditional banking sector of “greed or ignorance” for continuing to lobby against yield-bearing stablecoins in the CLARITY Act.
The White House has demanded that banks abandon their lobbying efforts against yield-bearing stablecoins in the upcoming CLARITY Act.
The fight is about a single question that has paralysed the bill for months: should stablecoins be allowed to pay interest to the people who hold them?
What the Fight Is Actually About
The GENIUS Act, signed into law in July 2025, established the basic rules for stablecoins in the US: full reserve backing, licensing requirements, and compliance standards. It also prohibits stablecoin issuers from offering any form of interest or yield to stablecoin holders, but does not explicitly prohibit affiliate or third-party arrangements that might offer interest-bearing products.
That gap is what the CLARITY Act is supposed to close. The bill, which passed the House with strong bipartisan support at 294 to 134 in July 2025, would create the comprehensive regulatory framework for digital assets in the US. But the Senate version has been stuck since January because banks and crypto companies cannot agree on what to do about stablecoin yield.
Banks argue that if stablecoins are allowed to pay interest, depositors will pull money out of bank accounts and into stablecoin wallets, starving banks of the deposits they need to make loans. The American Bankers Association has warned that trillions in deposits could migrate. Bank of America CEO Brian Moynihan said in February that yield-bearing stablecoins pose a direct threat to the banking system.
The crypto industry says the banks are protecting their margins at the expense of consumers. Why should a stablecoin holder earning nothing on their USDC accept 0% when their bank pays 0.39% on savings and charges 24% on credit cards?
The White House Just Picked a Side
The White House published a report on April 8 finding that even under the most aggressive assumptions, a stablecoin yield ban would produce only $531 billion in additional aggregate lending, corresponding to a 4.4% increase in bank loans. The conditions for that scenario require the stablecoin market to grow to roughly six times its current size, all reserves to be locked in unlendable cash rather than treasuries, and the Federal Reserve to abandon its current monetary framework.
Under realistic conditions, the report found the ban would add just $2.1 billion in lending, or 0.02% of total bank loans. In short, a yield prohibition would do very little to protect bank lending, while forgoing the consumer benefits of competitive returns on stablecoin holdings.
The American Bankers Association fired back, arguing the White House “studied the wrong question.” The ABA said the real risk is not whether banning yield helps banks, but what happens when yield-bearing stablecoins scale rapidly and community banks lose deposits they cannot replace.
Witt was unimpressed. His “greed or ignorance” comment is the most direct language any senior White House official has used against the banking lobby on crypto policy.
Why the Clock Is Running Out
The CLARITY Act needs a Senate Banking Committee markup before it can reach a full floor vote. That markup was derailed in January by bank lobbyists and has not been rescheduled. Senators Tillis and Alsobrooks have indicated the compromise text on yield could be released as early as next week. But if the Banking Committee does not advance the bill before the end of April, the political window narrows dramatically.
Senator Cynthia Lummis has warned that the bill might not be passed until 2030 if a compromise is not reached quickly. Democrats are expected to reclaim the House in November’s midterm elections, and crypto policy could be deprioritised under new leadership. The CLARITY Act is, in practical terms, a 2026-or-never proposition.
The crypto sector maintains that capitulating to bank demands will stifle domestic innovation. Dan Spuller, executive vice president of industry affairs at the Blockchain Association, said: “Our industry is in the 11th hour of negotiations and the push to force everything into a bank model is real.”
What the Compromise Looks Like
Senators from both parties reached a compromise in principle that would ban yield on passive stablecoin holdings that look like deposit accounts while still allowing activity-based rewards tied to genuine payments, transfers, and platform usage, similar to credit-card rewards programmes.
That distinction matters. Under the compromise, you would not earn interest simply for holding USDC in your wallet. But if you used USDC to make payments, settle trades, or interact with DeFi protocols, you could earn rewards for that activity. Banks have not endorsed this compromise. Crypto companies have accepted it reluctantly.
According to Messari data, the supply of yield-bearing stablecoins has grown 15 times faster than the broader stablecoin market over the past six months. The market is not waiting for Congress. Yield-bearing stablecoins are growing regardless of what the CLARITY Act says. The question is whether that growth happens inside a regulated US framework or moves offshore entirely.
For Bitcoin, Ethereum, and the broader crypto market, the CLARITY Act matters because it is the bill that would formally establish CFTC oversight over digital commodities, create registration categories for exchanges and custodians, and provide the regulatory certainty that institutional investors have been demanding for years. The stablecoin yield fight is a sideshow that has held all of that hostage. The White House just told the banks, in the bluntest terms possible, to let it go.
