Banks Arrived to Block, Not to Bargain
The second White House summit on the Digital Asset Market Clarity Act ended exactly where the first one started: deadlocked. On February 10, crypto executives from Coinbase, Ripple, a16z, the Crypto Council for Innovation, and the Blockchain Association sat across from representatives of the Bank Policy Institute and the American Bankers Association inside a closed-door session led by Patrick Witt, Executive Director of the President's Council of Advisors for Digital Assets. Both sides had been told to arrive with compromise proposals on stablecoin yield. Only one side followed the instructions.
According to sources with direct knowledge of the meeting, banking representatives presented a "principles" document that called for a comprehensive prohibition on stablecoin yield. The language sought to ban "any form of financial or non-financial consideration to a payment stablecoin holder in connection with the payment stablecoin holder's purchase, use, ownership, possession, custody, holding or retention of a payment stablecoin." That is not a compromise position. It is a total ban dressed in regulatory language, covering not just interest payments but any incentive, reward, or benefit tied to holding a stablecoin.
Crypto negotiators, by contrast, arrived prepared to discuss middle-ground solutions. The Blockchain Association's CEO described remaining "constructively engaged on resolving outstanding issues." The Digital Chamber's Cody Carbone expressed optimism that blocking issues "can be resolved." But optimism alone cannot move a counterparty that refuses to move itself.
The $6 Trillion Threat Driving the Banking Lobby's Hardline Stance
The banking industry's unwillingness to negotiate traces back to a single number that has haunted every stablecoin policy discussion since January: $6 trillion. Bank of America CEO Brian Moynihan warned during the company's Q4 2025 earnings call that up to $6 trillion in U.S. bank deposits, roughly 30% to 35% of all commercial bank deposits, could migrate to stablecoin platforms if Congress permits yield payments on dollar-pegged tokens.
The math is straightforward and terrifying for banks. Average U.S. savings accounts pay 0.39%. Checking accounts pay 0.07%. Meanwhile, platforms like Coinbase currently advertise 3.50% rewards on USDC through Coinbase One, and DeFi protocols routinely offer 4% to 8% on major stablecoins. That gap is not a minor pricing difference. It represents a structural incentive for consumers and institutions to move dollars off bank balance sheets and into stablecoin instruments.
The banking lobby's "principles" document explicitly stated that stablecoin activity "must not drive deposit flight that would undercut Main Street lending." This framing positions stablecoin yield as a systemic risk to the credit supply chain: fewer deposits means less lending capacity, which means reduced credit availability for small businesses and consumers. Whether that argument holds up under scrutiny is debatable, but it is the argument that has now frozen the CLARITY Act for the second consecutive month.
Why This Meeting Failed Where the Last One Stalled
The February 10 session was supposed to be the breakthrough. After the first White House meeting in late January produced no progress, Patrick Witt issued explicit instructions: both sides must arrive with concrete compromise proposals on stablecoin yield language. The White House set an end-of-February deadline for delivering agreed-upon legislative text to the Senate Banking Committee.
The crypto industry followed those instructions. Banking groups did not. Instead of offering modified language that might allow activity-based rewards while restricting passive yield, the banking delegation doubled down on prohibition. Their document requested regulatory enforcement mechanisms, a study examining stablecoin impacts on deposits, and a framework that "embraces financial innovation without undermining safety and soundness," a phrase that in practice means no yield of any kind.
This failure matters beyond the immediate policy debate. The Senate Banking Committee, chaired by Senator Tim Scott (R-SC), postponed its planned January 15 markup of the CLARITY Act and has not rescheduled. Without compromise language on stablecoin yield, the markup cannot proceed. Without markup, the bill cannot reach the Senate floor. Without floor passage, the most comprehensive crypto market structure legislation in U.S. history dies on the calendar.
Additional obstacles compound the problem. Senate Democrats are demanding restrictions on senior government officials' crypto involvement, greater protections against illicit finance, and full CFTC commissioner staffing before the agency receives expanded crypto regulatory authority. Floor time is shrinking as midterm election season approaches.
What This Means for Crypto Card Rewards and Stablecoin Users
The impasse has direct consequences for anyone earning yield on stablecoins or using crypto cards funded by stablecoin economics. Coinbase reported $355 million in stablecoin revenue during Q3 2025, representing 56% of its total net income that quarter. That revenue funds cashback programs, trading incentives, and the Coinbase One membership tier. If legislation ultimately bans yield-adjacent arrangements, the business model supporting those programs collapses.
The distinction between "rewards" and "yield" is where the real battle plays out. The Senate draft of the CLARITY Act prohibits digital asset service providers from offering interest or yield for simply holding stablecoin balances. But it allows stablecoin rewards tied to activity or membership constructs. Banks want that loophole closed entirely. Crypto firms argue the distinction is the entire point: spending-based rewards tied to transactions are fundamentally different from passive interest on deposits.
For crypto card holders, the practical impact depends on which model survives. Cards that offer cashback rewards tied to spending activity, such as the Crypto.com tiered system or Bybit's trading-linked incentives, would likely remain compliant under either outcome. Cards that fund their rewards through passive stablecoin yield on held balances face restructuring costs that could reduce reward rates or eliminate programs entirely.
The self-custody angle adds another dimension. The House version of the CLARITY Act includes explicit DeFi carve-outs, meaning decentralized protocols offering yield would remain untouched regardless of the stablecoin rewards outcome. That asymmetry could accelerate a shift away from centralized platforms toward DeFi-native yield strategies and self-custodial spending options.
The End-of-February Deadline and What Comes Next
The White House has not abandoned its mediation effort. Future talks will continue with a narrower group, and both sides have been told to return with agreed-upon changes to the bill's language before the month ends. The crypto PAC Fairshake, which has allocated $193 million for political spending, has already begun midterm campaign efforts with $5 million committed to the Alabama Senate race, a reminder that the stakes extend well beyond policy papers.
If the deadline passes without agreement, the matter returns to lawmakers' discretion. Senator Scott could move the bill to markup with his own preferred yield language, forcing the banking lobby to fight the provision during committee debate rather than in White House negotiations. That path is riskier but may be the only one that produces movement before the legislative window closes.
The crypto industry's public posture remains measured. Both the Blockchain Association and the Crypto Council for Innovation issued statements emphasizing continued engagement and constructive progress. Behind closed doors, frustration is mounting. Two White House meetings, explicit compromise instructions, and a firm deadline have produced zero movement from the banking lobby on their core demand: no yield, no exceptions.
For the $309 billion stablecoin market and the billions in annual rewards it generates, February's remaining weeks are the entire ballgame.
FAQ
What happened at the February 10 White House meeting? Banking representatives presented a principles document demanding a blanket prohibition on all forms of stablecoin yield, while crypto industry negotiators arrived with compromise proposals. Neither side changed position, ending the second White House mediation session in impasse.
Why do banks want to ban stablecoin yield? Bank of America's CEO warned that up to $6 trillion in bank deposits could migrate to stablecoin platforms if yield payments are permitted. Banks argue this would reduce lending capacity and threaten financial stability, particularly for community banks that rely heavily on deposit funding.
What is the end-of-February deadline? The White House has instructed both banking and crypto industry groups to deliver compromise legislative language on stablecoin yield provisions before the end of February 2026. This language is needed for the Senate Banking Committee to proceed with markup of the CLARITY Act.
How does this affect crypto card users? Cards that fund rewards through stablecoin yield economics may face restructuring if legislation passes. Cards tied to spending activity are more likely to survive. DeFi-based yield strategies remain untouched under the current House version of the CLARITY Act.
Overview
The second White House mediation on the CLARITY Act ended in impasse on February 10 after banking representatives presented a blanket prohibition on stablecoin yield rather than the compromise proposals the White House requested. The Bank Policy Institute and American Bankers Association want to ban "any form of consideration" tied to holding stablecoins, driven by fears that $6 trillion in bank deposits could migrate to higher-yielding crypto platforms. Crypto negotiators from Coinbase, Ripple, a16z, and the Blockchain Association arrived ready to discuss middle ground but found none. The White House has given both sides until the end of February to deliver agreed-upon legislative language, but the banking lobby's refusal to move on its core demand makes that deadline increasingly unlikely to produce results. For crypto card users and stablecoin holders, the outcome will determine whether activity-based rewards survive or yield-funded programs face elimination.
Recommended Reading
- White House Meeting Could Unfreeze the CLARITY Act This Week, but Crypto Rewards May Be the Price
- Gemini Staking Goes Live in New York, Unlocking Crypto Yield in America's Toughest Regulatory Market
- How to Stack Crypto Card Rewards With DeFi Yield
