White House Issues Ultimatum: End Passive USDC Yield or Kill the CLARITY Act
Administration officials convene Coinbase and banking giants to resolve the ‘deposit flight’ dispute blocking the H.R. 3633 market structure bill.
The Deal on the Table
The White House has intervened to break the legislative deadlock threatening to derail the U.S. crypto market’s primary regulatory vehicle. Administration officials have summoned executives from Coinbase, Ripple, and major banking trade groups to a closed-door summit on Feb. 10 to resolve a single, explosive issue: stablecoin yield.
Sources close to the negotiations confirm the administration is leveraging the stalled CLARITY Act (H.R. 3633), which passed the House in July 2025 but hit a wall in the Senate Banking Committee, to force a compromise. The proposed trade-off is stark: the industry gets its market structure bill and Commodity Futures Trading Commission (CFTC) oversight, but only if it agrees to a federal ban on “passive” stablecoin rewards that mimic bank interest.
Markets reacted nervously to the uncertainty, with Bitcoin struggling to hold $71,600 (-5.8%) as traders priced in the risk of a regulatory breakdown.
The $6.6 Trillion Fear
The dispute centers on the banking sector’s existential fear of “deposit flight.” With the stablecoin market cap swelling to $305 billion, Treasury modeling cited by the Bank Policy Institute warns that unchecked crypto yields could drain up to $6.6 trillion from traditional deposits if stablecoins are treated as loyalty products rather than securities.
Coinbase, which generated $355 million in stablecoin revenue in Q3 2025, has drawn a hard line. CEO Brian Armstrong pulled support for the bill in January after Senate drafters inserted language, dubbed “Section 404” by lobbyists, that would criminalize the exchange’s 3.5% USDC rewards program.
“The bank lobbying groups are out there trying to ban their competition,” Armstrong stated at Davos. “I have zero tolerance for that.”
The Likely Compromise: Activity vs. Holding
Reports suggest the White House is pushing a “middle path” amendment to unfreeze the bill. Under this framework, passive yield (paying users simply for holding USDC) would be banned, satisfying Treasury Secretary Scott Bessent’s concerns about “deposit volatility.”
In exchange, platforms would be permitted to offer “activity-based rewards” tied to payments, transaction volume, or loyalty tiers, effectively forcing issuers to redesign products like Coinbase One into rewards cards rather than savings accounts. If the deal holds, Senate Banking Chairman Sherrod Brown is expected to schedule a markup for late February; if it fails, H.R. 3633 is likely dead for the 119th Congress.
