- Clarity Act markup slips into May as friction points remain.
- Trump told memecoin holders at Mar-a-Lago over the weekend that he would sign it immediately.
The Clarity Act is stalling in Washington — but industry insiders say the outcome has already been decided.
Zachary Townsend, CEO of crypto insurance company Meanwhile, says that traditional banks lobbying to block yield-bearing stablecoins are “fighting a sideshow.”
“Every incumbent fights a better financial product,” Townsend said. “Stalling the Clarity Act doesn't change where this ends.
“They lobby, they delay, but they lose the market anyway.”
Townsend’s optimistic take comes as the Senate Banking Committee failed to schedule an April markup of the Clarity Act, pushing debate into May as three sticking points remain: decentralisation provisions, securing Republican votes, and stablecoin yield.
The delay comes even as President Donald Trump told memecoin holders at Mar-a-Lago over the weekend that he wants the bill passed and would sign it immediately.
“The banks are fighting a sideshow while the real deposit displacement is already underway,” Townsend said.
What’s the issue?
At the heart of the standoff lies stablecoin interest.
The Genius Act, signed into law by Trump in July 2025, requires stablecoin issuers to maintain one-to-one reserves backing outstanding tokens. Those reserves can include US dollars, federal reserve notes, insured deposits, short-term Treasuries and money market funds.
Crucially, the law prohibits issuers from offering direct interest or yield to stablecoin holders. It does not explicitly block affiliates or third parties from structuring yield products around them. Some versions of the proposed Clarity Act would close that gap entirely.
Banking groups argue that allowing stablecoins to offer competitive returns could drain deposits from traditional bank accounts. Because stablecoin reserves are fully backed rather than fractionally lent, critics warn this could shrink lending capacity.
But a White House economic analysis published earlier in April paints a different picture.
Using a baseline model, eliminating stablecoin yield increases bank lending by just $2.1 billion — roughly 0.02% of total lending — while imposing a net welfare cost of $800 million. Large banks account for 76% of the modest lending bump, with community banks contributing about $500 million, or a 0.026% increase in their lending.
Even under stacked “worst-case” assumptions — including stablecoins growing sixfold as a share of deposits and reserves locked entirely in non-lendable cash — the model produces a 4.4% increase in aggregate bank loans. Community bank lending rises by 6.7% in that extreme scenario.
Townsend sees the debate as symbolic. In his view, deposit migration is structural.
In January, Standard Chartered forecasted that banks could lose up to $1.5 trillion in deposits to stablecoins by 2028 regardless of yield rules.
Runway ending
The legislative calendar is tightening.
Republican Senator Thom Tillis has requested more time to consult banks on the yield issue and release draft text.
If it is not passed before the midterm elections in November, it could be delayed for years, according to Alex Thorn, head of research at Galaxy Digital.
“If the markup slips past mid-May, the probability of enactment in 2026 will drop sharply,” Thorn warned in a note shared with DL News. “In our view, the odds of Clarity being signed into law in 2026 are roughly 50-50, and possibly lower.”
Polymarket punters give the Clarity Act a 47% chance of being passed in 2026, down from 82% in February.
Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email him at lance@dlnews.com
