White House missed its stablecoin deadline, deepening the bank–crypto standoff over stablecoin yields, CLARITY Act, regulatory arbitrage and offshore risk.
White House missed its stablecoin deadline, deepening the bank–crypto standoff over stablecoin yields, CLARITY Act, regulatory arbitrage and offshore risk.
What to Know:
The White House’s self-imposed March 1 target for resolving a stablecoin framework passed without agreement, according to CryptoNews.net. The impasse centers on how, or whether, stablecoin holders can earn returns on their balances under federal rules.
A White House meeting with crypto firms and banking groups ended without a deal on “stablecoin yields,” as reported by Reuters. Bank representatives warned that paying interest or rewards on stablecoins could accelerate deposit flight from traditional institutions, while crypto advocates countered that a ban would drive innovation and capital offshore. In this context, yield refers to interest or rewards on dollar-pegged tokens, distinct from blockchain staking for network security.
The deadline miss underscores rising friction between banks and digital-asset platforms over market structure and prudential guardrails, as reported by AMBCrypto. The stalemate now overlaps with debates around the CLARITY Act and its treatment of stablecoins, DeFi, and other digital assets.
In the near term, banks are expected to continue pressing for either a prohibition on stablecoin yields or bank-like regulation of any interest-bearing features to limit deposit fragmentation. That position reflects classic liquidity and funding concerns tied to rapid outflows during stress.
Crypto platforms face product uncertainty. Decisions on offering interest-like features for stablecoin accounts, and on how to market rewards versus on-chain staking, remain on hold until federal guidance clarifies permissible structures.
On timing risk, the industry may be in for a longer runway if legislation stalls; the CIO of Bitwise has warned of a multi-year period in which projects must prove utility before comprehensive rules advance, as shared on Reddit. That prospect would keep policy risk elevated for platforms and their users.
Sustained clarity from prudential and market regulators is a prerequisite for scaling stablecoin infrastructure, said Christopher Waller, Governor, Federal Reserve. “Stablecoins must be supported by regulations that are predictable and risk-sensitive.”
Scenario analysis suggests two very different paths. If yields are broadly banned, stablecoin usage may skew toward payments and settlement, with rewards migrating to offshore venues, raising regulatory arbitrage concerns. If carefully allowed under bank-like or prudential standards, yields could remain onshore, with supervisory oversight aiming to mitigate run and liquidity risks.
At the time of this writing, Coinbase Global (COIN) traded at $175.12, down 3.28% intraday, based on Nasdaq real-time price data. Market moves reflect broader conditions and are not a signal about regulatory outcomes.
Debate over the CLARITY Act extends beyond yields to core asset classification. Charles Hoskinson has criticized drafts that would default new digital assets to securities status unless proven otherwise, arguing that such a posture could burden startups and deter U.S. formation, as reported by Blockzeit. He has also warned that insufficient protection for DeFi, prediction markets, and stablecoins could chill domestic development.
Global standard-setters have cautioned that uneven rules invite regulatory arbitrage. The Financial Times has reported the Financial Stability Board’s warnings that gaps and fragmentation can push issuance and liquidity to looser jurisdictions, complicating oversight and potentially eroding policy objectives.
Cross-border reciprocity is another pressure point. Paxos CEO Charles Cascarilla has urged lawmakers to align frameworks with overseas regimes to avoid ceding market share to foreign-issued stablecoins and to support domestic adoption, according to Cointelegraph.
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