March marks a critical period for the Clarity Act, which aims to bring comprehensive regulation to cryptocurrency markets in the US. While the Senate Banking Committee is expected to re-mark the bill for a vote, discussions between banks and the crypto sector regarding stablecoin yields are yet to conclude.
The March 1 deadline, set by Patrick Witt, Executive Director of the White House Crypto Council, for resolving disagreements between banks and crypto companies regarding stablecoin rewards, has passed. However, no agreement has been announced by that date. Nevertheless, industry representatives say that negotiations are ongoing and optimism remains that an agreement can be reached.
Summer Mersinger, CEO of the Blockchain Association, who actively participated in the talks, stated on social media that resolving multi-stakeholder and complex policy differences takes time. A source directly familiar with the negotiations from the banking side also indicated that the parties are still working on a draft text and that the March 1st deadline is not binding.
However, another source from the banking sector suggested that while the parties had agreed in principle not to pay interest on stablecoin balances, crypto companies were attempting to generate indirect returns (APY) through membership programs, reward mechanisms, and staking. Banks, on the other hand, argue that lending or staking activities should be “active,” “real,” and “time-locked,” and based solely on investment returns. Concerns have been raised that these vague terms could open the door to the reinvention of interest under different names.
On the regulatory front, the draft regulation published last week by the Office of the Comptroller of the Currency (OCC) under the GENIUS Act may have strengthened the hand of banks, suggesting that stricter-than-expected limits could be placed on stablecoin rewards.
As yield discussions enter their second month, it remains unclear when a compromise will be reached. However, the White House and industry stakeholders are reportedly keen to move the process forward. Collin McCune, head of government relations at Andreessen Horowitz, said that approaching a point where neither side is entirely satisfied usually signals an agreement.
On the other hand, it is reported that the Senate Banking Committee is considering setting a new markup date for mid- or late March. This could give the parties a few more weeks to address unresolved issues such as DeFi and ethics. Amanda Tuminelli, Executive Director of the DeFi Education Fund, stated that overall progress has been made, but the DeFi issue has been overshadowed by yield discussions.
Last week’s meeting among Senate Democrats regarding the market structure was reportedly viewed as “positive” by the participants. All eyes are now on the updated text of the bill and the date when the next official step in the Senate will be announced.
*This is not investment advice.
