- The CLARITY Act’s real conflict is stablecoin rewards, not SEC vs CFTC jurisdiction
- Banks view yield-bearing stablecoins as deposit competition in disguise
- The decision could determine who controls on-chain dollar liquidity in the US
The CLARITY Act is being marketed as a market structure fix. Define which agency regulates what, reduce overlap, stop the lawsuit-driven chaos. That’s the clean version, and it’s what gets repeated in headlines.
But the bill stopped being about jurisdiction the second stablecoin rewards became the sticking point. Once lawmakers started debating whether digital dollars can pay users to hold them, the conversation shifted from oversight to competition. The act may still be written in regulatory language, but the stakes are pure market power.
Stablecoin Yield Is the Actual Pressure Point
Crypto firms frame stablecoin rewards as basic utility. If a token is meant to be used on-chain, it needs to behave like capital, not dead money. Yield keeps stablecoins circulating inside DeFi, tokenized money markets, and settlement systems, instead of leaking back into banks the moment rates rise.
Banks see the same thing completely differently. To them, yield-bearing stablecoins are deposit substitutes wearing a tech costume. If users can hold a dollar token that earns rewards without traditional bank balance sheet rules, then deposits become less sticky, funding costs rise, and the banking system loses one of its biggest structural advantages. That’s why resistance is so intense. It’s not ideological. It’s survival math.
The Offshore Paradox Nobody Wants to Say Out Loud
The most awkward part of the debate is what happens if the US clamps down too hard. Demand for yield doesn’t disappear just because Washington bans it domestically. It reroutes.
Offshore stablecoins already operate outside many US restrictions. If compliant US issuers get boxed in, the likely result is not “less stablecoin yield.” It’s more power flowing to issuers and platforms that regulators have even less influence over. That’s the paradox sitting under the entire fight: strict rules can end up strengthening the very incumbents policymakers claim they want to contain.
This Is a Fight Over Liquidity, Not Crypto
At the deepest level, this isn’t even a crypto debate. It’s a debate over who gets to compete for dollar balances in a digital environment. Yield is the lever because it determines who can pay for loyalty.
If banks win, stablecoins become cleaner but less competitive, more like payment rails than financial products. If crypto wins, stablecoins start behaving like programmable deposit accounts, and the banking system has to compete on terms it didn’t design.
Conclusion
The CLARITY Act is being pitched as a regulatory cleanup bill, but markets are treating it like something else entirely: a decision about who controls dollar liquidity on-chain. The stablecoin yield fight isn’t a side issue. It’s the core. Because whoever gets to pay on digital dollars doesn’t just shape adoption. They shape the future structure of money itself.
