Stablecoins face yield limits as Senate eyes CLARITY markup

• Lyla Velez
• March 10, 2026
• News
• 0 Comments

Key Points:

• Senate debates permitting stablecoin rewards, distinguishing interest from activity-based incentives.
• White House mediates carve-out allowing activity-driven rewards, reconciling prior prohibitions.
• Banks warn yields could trigger deposit flight, stalling CLARITY Act progress.

The Senate is eyeing a markup of the clarity act with negotiations centered on whether stablecoin products may pay yield or rewards. The core distinction under debate is interest on idle balances versus activity-based rewards tied to use.

According to Vixio, White House–mediated, line‑by‑line talks are exploring a carve‑out for activity‑based rewards while reconciling earlier prohibitions on stablecoin interest and blanket reward programs. The aim is to narrow the dispute without derailing broader market‑structure provisions.

As reported by the Journal Record, banks argue that allowing stablecoin yields could accelerate deposit flight from traditional accounts, weakening lending capacity and local credit formation. That concern has been a principal reason the bill’s progress has stalled.

Why banks may have to compromise

As reported by Yahoo Finance, White House digital‑assets adviser Patrick Witt has described a viable path that protects banks, especially community banks, from deposit flight while preserving limited consumer rewards. He indicated negotiators have recently narrowed disagreements around how rewards would be structured.

Based on reporting from Gate.com, one approach would emphasize parity, enabling banks to offer comparable programs and products where permitted, while steering stablecoin incentives toward activity (for example, payments or transfers) rather than passive yield on idle balances. That framework seeks to balance competitive equity with safety‑and‑soundness goals.

From a policy‑drafting perspective, an activity‑based model typically hinges on observable, on‑chain or transactional events that generate capped, episodic benefits, rather than time‑based accrual on holdings that functions like interest. Proper definitions, disclosures, and supervisory guardrails would be essential to keep rewards from replicating deposit‑like features.

Where key voices stand: Lummis, Witt, Giancarlo

As reported by Decrypt, Sen. Cynthia Lummis (R‑WY) has urged banks to view stablecoins as an opportunity, citing potential for custody, payments, and new services, while expressing skepticism about efforts to restrict yields through semantics such as rebranding “interest” as “bonuses” or “rewards.” Her position underscores a preference for innovation with clear rules.

Witt has argued that the rewards debate is a narrow issue that should not upend the wider legislative package. “Use a scalpel, not a sledgehammer,” said Patrick Witt, a White House digital‑assets adviser, emphasizing targeted solutions over broad prohibitions.

As reported by CoinCentral, former CFTC Chair J. Christopher Giancarlo has warned that prolonged uncertainty could leave banks worse off as crypto firms advance without clear statutory guidance. In his view, legal clarity would reduce fragmentation and competitive disadvantages for regulated institutions.