US Stablecoin Regulation Nears Key Deadline
The US payments industry is approaching a March 1 deadline under the CLARITY Act, which will determine if stablecoin issuers can offer yield-bearing products. The outcome will shape how credit intermediation is structured and could disintermediate traditional bank deposits if yields are permitted. This policy debate is viewed as a fundamental decision on who is permitted to "manufacture money" in the United States.
- The CLARITY Act is part of a larger legislative effort to establish a comprehensive regulatory framework for digital assets in the U.S. It follows the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in July 2025, which specifically banned issuers from offering interest on payment stablecoins. The CLARITY Act aims to resolve the jurisdictional ambiguity between the SEC and the CFTC that has led to "regulation by enforcement." - A central point of contention stalling the bill in the Senate is the scope of the yield prohibition. While the GENIUS Act banned *issuers* from paying interest, the CLARITY Act is addressing whether affiliated platforms or third parties can offer rewards or yield-bearing programs, a loophole that concerns banking industry lobbyists. - Research highlights the potential for significant deposit outflows from traditional banks if stablecoins are allowed to bear interest. One study projected that non-interest-bearing stablecoins could lead to a 6% drop in deposits, while interest-bearing ones could cause a 25% or more decline, reducing bank lending capacity by an estimated $1.5 trillion. - The debate over yield-bearing stablecoins is fundamentally a discussion about the separation of banking and commerce. Prohibiting yield is seen by some as essential to protect the role of banks in credit creation and to prevent a scenario where stablecoin issuers, backed by Treasury securities, effectively transform bank depositors into funders of government growth rather than economic growth. - For payments infrastructure, stablecoins are increasingly viewed as another payment rail to be integrated alongside ACH, wires, RTP, and FedNow. Financial institutions are developing API-first payment hubs to orchestrate transactions across both traditional and blockchain-based networks, routing payments based on factors like cost, speed, and risk. - The integration of stablecoins with real-time payment systems like FedNow is seen as a critical step for institutional adoption. Standardization, such as through ISO 20022, is considered vital for stablecoins to connect directly with banking APIs and payment networks, enabling them to function as foundational infrastructure. - The market capitalization of leading stablecoins reportedly tripled since 2023, reaching $260 billion by December 2025, driven by institutional demand for efficient settlement and treasury management. As they grow, stablecoin issuers have become significant buyers of U.S. Treasurys, with projections suggesting they could hold up to $1.2 trillion by 2030. - Key legislators involved in shaping stablecoin regulation include Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), who have been central figures in drafting bipartisan frameworks. The White House has taken an active role, convening meetings with crypto executives from firms like Coinbase and Ripple, alongside banking representatives, to broker a compromise ahead of the deadline.
