Senate ‘Clarity’ Bill Bans Stablecoin Yields; Coinbase Pulls Support

The U.S. Senate Banking Committee’s latest market structure draft has drawn a hard line in the sand: passive stablecoin yield is dead. In a move widely interpreted as a victory for the banking lobby, the revised legislation explicitly prohibits issuers from paying interest on idle tokens, a feature banks argued would cannibalize their deposit base. The backlash was immediate. Coinbase withdrew its support, forcing the committee to postpone its markup vote.

The $6 Trillion Panic

The provision appears to be a direct response to warnings from Bank of America CEO Brian Moynihan. In a recent earnings call, Moynihan projected that up to $6 trillion in commercial deposits could flee the traditional banking system if regulated stablecoins were permitted to offer yield comparable to money market funds. The logic is simple: why hold a 0.01% checking account when a digital dollar could offer 4-5% risk-free?

The Senate’s Clarity Act bans any form of yield for simply holding a stablecoin. Instead, it allows companies to offer rewards or incentives on activities such as transactions… and providing liquidity in DeFi protocols.

This "activity-only" exemption creates a bizarre regulatory arbitrage. While "sit-and-earn" is banned, protocols that require active liquidity provision, like Ethena (ENA) or Ondo Finance (ONDO), might technically skirt the rule, though the market remains hesitant. ENA slipped 1.3% to $0.175, while ONDO held firm at $0.34 (+1.6%), suggesting investors see the latter’s tokenized treasury model as more resilient to this specific legislative language.

The Geopolitical Gamble

Critics argue the ban hands a strategic advantage to foreign competitors. SkyBridge Capital founder Anthony Scaramucci slammed the proposal, noting that the People’s Bank of China (PBOC) already permits yield on the digital yuan (e-CNY). By handicapping the U.S. dollar’s digital equivalent, Scaramucci argues, Washington is effectively subsidizing the adoption of Beijing’s currency in emerging markets.

"The system is broken," Scaramucci posted on X, highlighting the contradiction of banks fearing competition while simultaneously demanding protection from it.

The Loophole & The Standoff

The bill attempts to thread a needle by allowing "rewards" for specific behaviors: transactions, remittances, or DeFi liquidity provision. This effectively forces yield-seekers further out on the risk curve, pushing capital away from safe, regulated issuers like Circle and toward complex DeFi strategies or offshore entities.

With Coinbase CEO Brian Armstrong calling the draft "materially worse than the status quo," the legislation is now in limbo. The vote delay signals that while the banking lobby won the drafting round, the crypto industry retains enough leverage to stall the process entirely.