CLARITY Act Could Clear Congress by April as Stablecoin Yield Fight Intensifies

The Road to April

The CLARITY Act—formally the Crypto Legal Architecture for Responsible Innovation and Transparency in Your finances Act—is closer to becoming law than any previous attempt at comprehensive crypto regulation in the United States. Senator Bernie Moreno, who chairs the Senate Banking Committee’s digital assets subcommittee, told reporters on February 18 that he expects the bill to clear both chambers by April, setting the stage for a presidential signature before summer recess.

The House already passed its version of the bill in a bipartisan 294–134 vote in late January, marking the widest margin of support for any standalone crypto legislation in US history. The bill establishes a clear framework for classifying digital assets as either securities or commodities, gives the CFTC primary jurisdiction over crypto spot markets, and creates a registration pathway for exchanges and token issuers that want to operate legally within US borders.

But the Senate version has encountered turbulence. The Banking Committee has been meeting almost daily since early February, and while there is broad agreement on the bill’s core framework, three key issues threaten to derail the April timeline: stablecoin yield, DeFi developer liability, and the interplay between existing securities law and the new regulatory regime.

The Stablecoin Yield Fight

The most contentious issue in Senate negotiations is whether stablecoin issuers should be permitted to pay interest or yield to holders. Currently, major stablecoins like USDC and USDT generate billions of dollars in revenue from the Treasury bills and other short-term instruments backing their tokens—but that yield flows entirely to the issuing companies, not to the holders.

Crypto firms and a growing number of DeFi protocols want the option to pass yield through to users, arguing that interest-bearing stablecoins would accelerate adoption and bring traditional savings products on-chain. Circle, the issuer of USDC, has been quietly developing a yield-bearing variant that would distribute a portion of reserve income to institutional holders. Several DeFi lending protocols already offer synthetic yield on stablecoins through liquidity pools, creating a de facto market for stablecoin interest that exists outside the regulatory perimeter.

The banking lobby, led by the American Bankers Association and the Bank Policy Institute, has mounted fierce opposition. Their argument is straightforward: if stablecoin issuers can offer interest rates competitive with savings accounts—currently yielding 4.5% to 5.0% at most major banks—without the regulatory overhead of FDIC insurance, capital requirements, and Community Reinvestment Act obligations, deposits will migrate out of the banking system. The ABA estimates that even a modest 3% stablecoin yield could redirect $400 billion to $600 billion in deposits away from banks within three years, potentially destabilizing lending markets.

The White House has inserted itself as mediator. Treasury Secretary Scott Bessent has held multiple closed-door sessions with crypto CEOs, bank executives, and key senators, seeking a compromise that would allow some form of yield distribution while maintaining bank competitiveness. One proposal under discussion would cap stablecoin yield at 2% below the federal funds rate, effectively ensuring stablecoins can never offer rates that match bank savings accounts. Another would restrict yield-bearing features to stablecoins held in regulated wallets with identity verification, creating a two-tier system.

The GENIUS Act Connection

Adding complexity to the stablecoin debate, the GENIUS Act—a companion bill focused specifically on stablecoin regulation—has already passed both chambers and is awaiting implementation. The GENIUS Act establishes a federal regime for stablecoin issuance, requiring full reserve backing with high-quality liquid assets, quarterly independent audits, and registration with either the OCC or state regulators depending on issuer size.

The implementing regulations for the GENIUS Act are due by July 18, 2026, meaning any yield-related provisions in the CLARITY Act need to be reconciled with the existing stablecoin framework. Some senators have argued that the yield question should be deferred to the GENIUS Act’s rulemaking process rather than legislated directly, which would buy time but also introduce uncertainty for issuers planning product roadmaps.

The stablecoin market itself is providing its own argument for urgency. Total stablecoin supply is approaching $300 billion, up from $124 billion at the start of 2024, and daily on-chain stablecoin transfer volume regularly exceeds Visa’s global payment volume. The asset class has grown too large and too systemically important for regulatory ambiguity to persist.

DeFi Developer Protections

The second unresolved issue is how the CLARITY Act treats developers who build decentralized protocols. The House version includes a provision stating that software developers who create protocols but do not hold, control, or have access to customer funds should not be classified as money transmitters or financial intermediaries. This “developer safe harbor” was championed by the crypto industry as essential for preventing the regulatory treatment that drove projects like Uniswap and Aave to consider offshore structures.

In the Senate, several members of the Banking Committee have pushed back, arguing that the safe harbor is too broad and could provide cover for developers who knowingly facilitate money laundering or sanctions evasion. The compromise being discussed would retain the safe harbor but add a “knowledge standard”—developers would lose their protection if they had actual knowledge that their protocol was being used primarily for illicit activity and failed to implement reasonable mitigations.

The DeFi industry has cautiously accepted this framing, though concerns remain about how “actual knowledge” and “reasonable mitigations” would be defined in practice. The Blockchain Association, which represents over 100 crypto companies, has submitted detailed proposals for what constitutes adequate developer compliance, including sanctions screening at the frontend level and cooperation with law enforcement requests.

Consumer Adoption Already Ahead of Regulation

While Washington debates, consumer behavior is racing ahead. A February 2026 survey conducted by BVNK and YouGov across 2,000 US adults found that stablecoin awareness and adoption have reached mainstream levels. Key findings include: 71% of respondents said they would use a stablecoin-linked debit card if offered by their bank or a trusted fintech provider. 77% would open a crypto wallet through their existing bank if the option were available. 39% reported receiving at least some portion of their income in stablecoins or cryptocurrency. And 54% of Gen Z respondents (ages 18–29) said they trust stablecoin issuers “as much or more” than traditional banks to hold their money safely.

These numbers represent a dramatic shift from even two years ago, when stablecoins were primarily a tool for crypto traders moving between exchanges. Today, stablecoins are increasingly used for cross-border remittances, freelancer payments, and as a dollar-denominated savings vehicle in countries with unstable local currencies. The US regulatory framework needs to account for this global reality—regardless of what Congress decides, stablecoin usage will continue to grow internationally.

Market Impact and What Comes Next

Crypto markets have reacted cautiously to the legislative progress. While the CLARITY Act’s passage would remove a significant overhang of regulatory uncertainty, traders are wary of the compromises being made in the Senate. If the stablecoin yield provision is watered down significantly, DeFi protocols that currently generate billions in revenue from yield products could face new compliance burdens that affect their business models.

For Bitcoin and Ethereum, the impact is more indirect but potentially profound. Clear rules of the road would likely accelerate institutional adoption, as asset managers and banks that have been waiting on the regulatory sidelines would finally have a framework within which to build products. JPMorgan, Goldman Sachs, and Morgan Stanley have all publicly stated that regulatory clarity is the primary remaining barrier to launching crypto custody, trading, and lending services for their clients.

The April timeline remains ambitious. Senate floor votes, conference committee reconciliation with the House version, and a presidential signature all need to happen within roughly six weeks. But with bipartisan support, White House backing, and an industry that has spent over $200 million on lobbying since 2023, the CLARITY Act has more momentum than any crypto bill before it. The question is no longer whether comprehensive crypto regulation will pass—but what compromises it will carry when it does.