- Ripple CEO Brad Garlinghouse urged industry to get the Clarity Act passed.
- President Trump is backing crypto firms over banking associations.
- The act will delegate most oversight of the crypto industry to the CFTC.
Brad Garlinghouse continues to push for key new crypto rules, even as others say the Clarity Act is flawed.
The CEO of Ripple, the creators of the XRP token, took to social media on Tuesday to praise US President Donald Trump’s “pointed message” urging lawmakers to pass the Clarity Act.
Trump sided with the crypto industry in a Tuesday post, after traditional banks criticised stablecoin legislation language that would allow crypto firms to pass interest on stablecoin holdings to their customers.
That row may even derail the Clarity Act.
“An extremely pointed message from POTUS to those who are dragging their feet on Clarity,” wrote Garlinghouse. “This is, and always has been, about what’s in the best interest of the American people.”
Stablecoin loophole
Though the Genius Act, which passed last summer, banned passing on interest to stablecoin holders, crypto companies found a convenient workaround.
Coinbase, the largest crypto exchange in the US, for instance, pays interest to stablecoin holders as “rewards.” The company has also put this rewards programme behind a subscription product called Coinbase One, framing any financial incentives as a loyalty benefit for users.
Banking lobby groups are eager to close this loophole by adding new language to the upcoming Clarity Act.
The crypto lobby has opposed those changes, hence the clash.
Until those those differences can be settled, the act — a key piece of legislation according to many industry insiders — is on hold.
“The banks should not be trying under the Genius Act, or hold the Clarity Act hostage,” Trump said. “They need to make a good deal with the crypto industry because that’s what’s in the best interest of the American people.”
The Trump family owns and operates the fifth-largest stablecoin on the market, called USD1, according to DefiLlama.
It is issued by the company World Liberty Financial, of which the president is a co-founder Emeritus.
What is the Clarity Act?
Though landmark stablecoin legislation passed swiftly in the US, legislation that will delegate oversight of the crypto industry to regulatory agencies has hit a major roadblock.
The Clarity Act will define different cryptocurrencies as either commodities or securities.
Cryptocurrencies will meet these definitions based on what lawmakers are calling sufficient decentralisation. This refers to the extent of control that developers or companies may have over any of the blockchain network’s critical infrastructure or token issuance.
A cryptocurrency that achieves sufficient decentralisation would qualify as a commodity and fall under the purview of the Commodity and Futures Trading Commission.
The securities regulator, the Securities and Exchange Commission, has emerged as a very lenient partner for the crypto industry during Trump’s second term; it’s widely held that the CFTC would be even more lenient.
The stakes are high to get the bill passed.
US Secretary of the Treasury Scott Bessent attributed Bitcoin’s volatility in February to the gridlock between lawmakers and a group of crypto firms over the Clarity Act.
Likewise, Garlinghouse forecast Bitcoin would hit new highs in 2026 if the bill were passed.
The heat of the debate hinges on this one key stablecoin clause, however.
Battle of the banks
Large banks are concerned that without interest restrictions on stablecoins, clients will withdraw their funds en masse to convert them to stablecoins and hold them on a crypto exchange.
Standard Chartered said that this deposit flight could see up to $500 billion exit the traditional banking system by 2028 if the Clarity Act is passed.
Jamie Dimon, the CEO of JPMorgan, said on Monday that if crypto firms want to pay customers stablecoin rewards, they need to be properly regulated and become banks so they can compete fairly with traditional lenders.
On Wednesday, the banking lobby hit back against the Federal Reserve Bank of Kansas City’s decision to grant Kraken, a major crypto exchange, the rights to use the same payment rails as banks and credit unions.
“We are deeply concerned,” Paige Pidano Paridon, co-head of regulatory affairs at the Bank Policy Institute, said in a statement.
For now, the Clarity Act is stuck in the Senate Banking Committee after an agreement between the banking community and crypto firms fell apart last week.
Liam Kelly is DL News’ Berlin-based DeFi correspondent. Have a tip? Get in touch at liam@dlnews.com.
