Bessent to Crypto ‘Nihilists’: Pass the CLARITY Act or Move to El Salvador

Treasury Secretary draws a line in the sand, explicitly backing banking lobby concerns over stablecoin yield as Bitcoin struggles to hold $80,000.

U.S. Treasury Secretary Scott Bessent issued his sharpest ultimatum yet to the digital asset industry Thursday, telling opponents of the administration’s stalled market structure bill to “move to El Salvador” if they cannot accept U.S. regulatory oversight. Speaking before the Senate Banking Committee regarding the FSOC annual report, Bessent characterized factions blocking the CLARITY Act as a “nihilist group” endangering financial stability.

The comments mark a decisive pivot for the Treasury, which now explicitly sides with banking lobbies against unrestricted stablecoin yields. Markets reacted poorly to the hostile tone, with Bitcoin sliding 4% to trade near $79,200, erasing gains from earlier in the week.

The ‘Yield’ War: Section 404

The conflict centers on the CLARITY Act, a bill designed to legitimize U.S. crypto market structure which has languished in the Senate since passing the House in mid-2025. The sticking point is Section 404, a provision that would permit stablecoin issuers to pass yield directly to retail holders, a feature banks argue would trigger catastrophic deposit flight from regional lenders.

Bessent left no ambiguity on where the administration stands.

“There seems to be a nihilist group in the industry who would prefer no regulation over this very good regulation. We have to get this Clarity Act across the finish line. Any market participants who don’t want it should move to El Salvador.”

By framing the yield restriction as a non-negotiable prerequisite for passing the bill, Bessent effectively told major stablecoin issuers (like Circle and Paxos) they must choose between a U.S. charter and a yield-bearing product model. The “El Salvador” remark, a reference to the nation’s Bitcoin-legal tender experiment, was not a suggestion, but a dismissal of the “code is law” ethos still pervasive in DeFi sectors.

No Bailouts, No Backstops

The friction is compounded by the Treasury’s refusal to offer a safety net. In separate testimony this week, Bessent confirmed the Treasury has no authority or intention to bail out crypto intermediaries, even as leverage washes out of the system. This reinforces a “regulation or ruin” doctrine. Comply with the CLARITY Act’s restrictive banking safeguards, or operate offshore without access to U.S. dollar rails.

For institutional allocators, the message is a double-edged sword. The administration wants a regulated market, but only one that does not compete with commercial bank deposits. Until the industry capitulates on the yield question, the regulatory freeze, and the liquidity drain, will likely persist.