Supporters say it brings order to digital assets. Critics argue it does something else entirely.
It protects the traditional banking system from a new kind of competition. At the center of the debate is a simple question beginners and investors should understand. Who gets to earn yield, and who does not.
Why Yield Threatens the Banking Model
Banks have relied on deposits for decades. They pay savers very little, often around 0.1 percent, and use those deposits to make loans. Stablecoin issuers work differently. They typically hold short term US Treasury bills, which in recent years have yielded about 4.5%. That spread creates a problem for banks. If stablecoins could pass even part of that yield to users, deposits could move fast.
After reviewing the Senate Banking draft text over the last 48hrs, Coinbase unfortunately can’t support the bill as written.
There are too many issues, including:
– A defacto ban on tokenized equities
– DeFi prohibitions, giving the government unlimited access to your financial…— Brian Armstrong (@brian_armstrong) January 14, 2026
A real world example makes this clear. Money market funds already pay higher yields by holding government debt. In 2023 and 2024, they attracted hundreds of billions of dollars as savers searched for better returns. Stablecoins could offer a similar option, but with faster transfers and global access.
Video Statement from @bgarlinghouse, @Ripple CEO on the Clarity Act postponement and Coinbase’s withdrawal of support from CfC St. Moritz.
“Clarity is always better than chaos and the industry needs clarity”. pic.twitter.com/HcOr6UGH3u
— Leonidas (@LeoHadjiloizou) January 16, 2026
According to a study by the Kansas City Federal Reserve, if stablecoins paid competitive interest rates, US banks could lose about 25.9% of deposits. That would remove roughly 1.5 trillion dollars in lending capacity. Community banks, which rely heavily on deposits to fund local loans, would feel the biggest impact.
What the Clarity Act Actually Does
Instead of competing on rates or technology, banking groups turned to legislation. Section 404 of the CLARITY Act bans yield payments on stablecoins through any method. This includes direct payments from issuers and indirect payments through exchanges, partners, or affiliates. The wording is broad and designed to close every path to sharing yield with users.
The Senate Banking Committee’s CLARITY Act is the result of more than six months of good-faith, bipartisan negotiations and has benefited from consultation with industry participants, legal and academic experts, and key stakeholders.
Here are the facts:https://t.co/hEBjGKt09K
— U.S. Senate Banking Committee GOP (@BankingGOP) January 13, 2026
Coinbase CEO Brian Armstrong reviewed the 278 page draft closely. After less than two days, he withdrew the company’s support late at night. By morning, the planned markup was postponed. His concern was simple. The bill did not just regulate crypto. It locked in an advantage for banks by law.
This approach follows a familiar pattern. After the 2008 crisis, Dodd Frank reshaped finance in ways that favored large incumbents who could afford compliance. Many in crypto see the CLARITY Act as a digital version of that playbook.
The Clarity Act Is Not “Capture.”
It Is Alignment.The Clarity Act governs behavior – but the architecture governs power.
Law can constrain actors, but only transparent, atomic systems eliminate the incentives and mechanisms for abuse.Digital asset markets don’t fail because… pic.twitter.com/z2vfD9inEq
— Rob Cunningham | KUWL.show (@KuwlShow) January 14, 2026
The timing also matters. On December 29, China moved in the opposite direction by allowing its digital yuan to carry interest. While the US debates banning stablecoin yield, Beijing is experimenting with paying it.
Disclaimer
The information provided by Altcoin Buzz is not financial advice. It is intended solely for educational, entertainment, and informational purposes. Any opinions or strategies shared are those of the writer/reviewers, and their risk tolerance may differ from yours. We are not liable for any losses you may incur from investments related to the information given. Bitcoin and other cryptocurrencies are high-risk assets; therefore, conduct thorough due diligence. Copyright Altcoin Buzz Pte Ltd.
The post Why Are Banks Blocking Stablecoin Yield with CLARITY Act? appeared first on Altcoin Buzz.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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