The long-standing stalemate over how stablecoins should be regulated in the United States just hit a major turning point. With the release of the final provisions regarding stablecoin yields, the CLARITY Act is moving from a stalled piece of legislation to a high-priority “must-pass” bill. Coinbase Chief Legal Officer Faryar Shirzad summed up the industry sentiment on Friday with a simple call to action: “It’s time to get CLARITY done.”
The finalized text, spearheaded by Senators Thom Tillis and Angela Alsobrooks, attempts to strike a delicate balance between the traditional banking sector and the burgeoning crypto industry. For months, banks have voiced concerns that high-yield stablecoins would drain their deposits, creating an unlevel playing field. The new compromise seeks to settle that dispute, though it hasn’t left everyone happy.
The End of “Risk-Free” Yield? Decoding Section 404
The heart of the new update lies in Section 404, titled “Prohibiting interest and yield on payment stablecoins.” The rule is straightforward: crypto firms are strictly prohibited from paying interest or yield to customers just for holding a stablecoin. This effectively bans stablecoins from acting as “shadow bank accounts” where users earn passive income simply by letting their digital dollars sit idle.
However, there is a silver lining for crypto enthusiasts. The bill distinguishes between passive interest and rewards tied to “bona fide activities.” This means Americans can still earn rewards based on the actual usage of crypto platforms and networks. Shirzad noted that while banks secured more restrictions, the industry successfully protected the ability for users to earn incentives through active participation in the ecosystem.
High Stakes and Predicted Timelines: The Road to May 11
The reaction from the industry has been a mix of relief and renewed urgency. Coinbase CEO Brian Armstrong kept his response brief, urging Congress to “Mark it up,” while Galaxy Digital’s Head of Research, Alex Thorn, suggested that the Senate Banking Committee could schedule a markup as early as the week of May 11. This sense of momentum is reflected in the markets; on Polymarket, traders now see a 55% chance of the CLARITY Act passing in 2026, a notable jump following the announcement.
Despite the progress, the path ahead isn’t without hurdles. Thorn warned that the banking lobby is likely to ramp up its opposition now that the final text is public. Furthermore, the clock is ticking. Senator Cynthia Lummis previously described the current window as a “now or never” moment for crypto regulation. With Senator Bernie Moreno predicting a resolution by the end of May, the next few weeks will determine if the U.S. finally establishes a clear legal framework for the $150+ billion stablecoin market.
