Trump summons banks and crypto giants! CLARITY bill negotiations restart, focusing on stablecoin interest provisions

Trump officials met with senior banks and crypto executives this week to restart negotiations on the CLARITY Act, with the focus of the controversy being the potential outflow of $6 trillion in deposits due to stablecoin interest provisions. Coinbase withdraws its support for accusing banks of eliminating competition, while crypto giants like Circle and Ripple remain supportive.

The White House emergency meeting restarted the stalled bill

According to Reuters, officials from the Trump administration will meet with executives in the banking and cryptocurrency industries on Monday as lawmakers attempt to restart the stalled CLARITY Act. The meeting will be hosted by the White House Crypto Committee and will convene industry trade groups to discuss how the bill handles interest and other incentives offered by stablecoins pegged to the U.S. dollar, according to people familiar with the matter.

The CLARITY Act is a proposed cryptocurrency market structure bill that aims to clarify how the United States regulates digital assets, including how the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) divide regulatory powers. The bill has been on hold in the Senate for months, and a vote scheduled for a banking committee earlier this month was postponed due to concerns from lawmakers and industry groups about stablecoin interest terms.

It is no accident that the Trump administration chose to intervene at this time. As U.S. crypto regulatory policy shifts to “innovation-friendly” across the board during Trump’s second term, the CLARITY Act is seen as the cornerstone of establishing a regulatory framework. However, conflicts of interest between banks and crypto companies have become the biggest obstacle to the bill’s progress. The establishment of the White House Crypto Committee itself reflects Trump’s emphasis on the industry, and directly convening a meeting between the two sides shows that the government hopes to play the role of an “arbitrator” and push all parties to reach a compromise.

The timing of the meeting is also worth paying attention to. The end of January coincides with the start of a new round of deliberation cycles by the Senate Banking Committee, and if a breakthrough can be made in Monday’s meeting, the bill may re-enter the voting process in February. For the crypto industry, eagerly awaiting regulatory clarity, each week of delays means more uncertainty and delays in investment decisions. The Trump administration clearly wants to speed up the process and deliver on its campaign promise to become the “first crypto president.”

The list of participants for this conference is highly symbolic in itself. Banking representatives may include executives from Wall Street giants such as Bank of America and JPMorgan Chase, who hold the core resources of the US financial system. The cryptocurrency industry may send CEOs from leading companies such as Coinbase, Circle, and Ripple. These opponents, who usually compete in the market, must now find consensus under the coordination of the White House, a scenario that is extremely rare in the history of US financial regulation.

Bank panic with $6 trillion deposit outflow

Progress on the CLARITY bill has been slowed by controversy over whether third parties should be allowed to provide stablecoin yields. While the GENIUS Act, passed in July 2025, prohibits stablecoin issuers from paying interest, it does not specify whether exchanges or other intermediaries can offer rewards, a loophole that exacerbates tensions between crypto companies and traditional banks.

For months, the banking lobby has been urging Congress to ban the proceeds of third-party stablecoins, which they believe could trigger deposit outflows and weaken the banking system. On January 15, Bank of America CEO Brian Moynihan issued a stern warning that interest-bearing stablecoins could lead to up to $6 trillion in outflows from Bank of America, potentially limiting lending and driving up borrowing costs.

This $6 trillion figure is not alarmist but a realistic projection based on the deposit structure of the U.S. banking system. The total deposits in the U.S. banking system are currently about $18 trillion, of which demand deposits and low-interest savings accounts account for about one-third. If interest-bearing stablecoins offer 4%-5% annualized returns (investment returns from treasury bonds or money market funds), while traditional bank savings accounts only offer 0.5%-1% interest, rational depositors will naturally choose to transfer funds.

Moynihan’s concerns are not unreasonable. The bank’s business model is based on the spread of “absorbing low-interest deposits and issuing high-interest loans”. If a large amount of deposits flow to interest-bearing stablecoins, banks’ sources of funds will dry up and they will be forced to raise deposit interest rates to retain customers, which will compress spreads and weaken profitability. More seriously, if deposits are lost too quickly, it could trigger a liquidity crisis, forcing banks to sell assets to meet withdrawal needs, similar to the collapse of Silicon Valley Bank in 2023.

Three reasons why banks oppose interest-bearing stablecoins

Risk of deposit loss: $6 trillion flows from the banking system to stablecoins, weakening lending capacity and driving up borrowing costs

Regulatory arbitrage is unfair: Stablecoin issuers do not need to comply with strict regulations such as bank capital adequacy ratios and deposit insurance

Financial stability threats: If there is a problem with the stablecoin issuer, it may trigger a systemic risk similar to a bank run

However, crypto companies see this as a protectionist act by banks trying to use legislation to eliminate competition. Crypto exchanges like Coinbase, which offer stablecoin rewards, argue that banks, which have enjoyed oligopolistic profits for decades and now seek government protection in the face of innovative competition, violate free market principles.

Coinbase’s withdrawal of support has detonated industry divisions

On January 14, Coinbase CEO Brian Armstrong withdrew his company’s support for the CLARITY bill, saying Coinbase “would rather have no bill than a bad bill.” This statement shocked the industry, as Coinbase, as the largest compliant crypto exchange in the United States, has been a vocal advocate for regulatory cooperation. Armstrong’s public opposition marked his belief that the bank lobbying had seriously distorted the content of the bill.

Armstrong elaborated on social media: “Banks are afraid of competition, so they try to pass legislation to prohibit us from providing better services. This is not regulation, this is protectionism. If we accept such a bill, it is equivalent to acknowledging that innovation must make way for vested interests.” This tough stance resonates in the crypto industry, with many supporters arguing that Coinbase is defending the industry’s living space.

However, opposition to the bill within the crypto space is not entirely unanimous. Several prominent companies and advocacy groups, including Coin Center, a16z, Digital Chamber, Ripple, and others, have expressed their support for the Senate’s proposal. This split reflects differences in interests within the industry: Coinbase’s core business is retail trading and stablecoin yield products, limiting income directly impacting its business model; Companies like Ripple, on the other hand, derive their main revenue from other businesses (such as cross-border payments and institutional services) and are less sensitive to stablecoin yield restrictions.

Advocacy groups such as Coin Center supported the bill on the grounds that “there is a framework before optimization.” They argue that even if the current version is not perfect, establishing a basic regulatory framework is more important than ongoing uncertainty. Once the bill is passed, the details can be gradually optimized through amendments. On the contrary, if the bill is aborted due to internal differences, the entire industry may return to the gray area of “no basis”, which is a disaster for all participants.

This division within the industry is exactly what the White House meeting is trying to address. If crypto companies cannot unify their positions, bank lobbying will have the upper hand. The Trump administration clearly wants to foster an internal consensus within the crypto industry to strengthen its leverage when negotiating with banks.

A legal gray area for third-party revenue clauses

The core contradiction lies in the interpretation of legal loopholes. The GENIUS Act explicitly prohibits stablecoin issuers from paying interest, which means that Circle (USDC issuer) and Tether (USDT issuer) cannot pay interest directly to holders. However, the bill does not specify whether exchanges or other intermediaries can offer rewards.

The current actual operation is: exchanges such as Coinbase earn interest on their stablecoin holdings (investing stablecoin reserves in treasury bonds or money market funds) and then return a portion of the proceeds to users in the form of “rewards”. This model does not technically violate the GENIUS Act, as the interest payer is the exchange, not the issuer. However, banks believe that this is “exploiting legal loopholes” and essentially bypassing regulatory intentions.

Monday’s White House meeting will focus on bridging this legal gray area. Possible compromises include setting a cap on third-party income (e.g., not exceeding Treasury yields), requiring third parties to hold higher capital reserves, or incorporating intermediaries that provide income into bank-style regulation. These solutions all try to find a balance between “protecting banks” and “allowing innovation”.