Negotiations over the cryptocurrency reform bill have ground to a halt, with major banks refusing to endorse a White House-brokered compromise, throwing the legislation’s fate into uncertainty and drawing sharp rebukes from President Donald Trump.
The impasse underscores the deep divisions between traditional finance and the burgeoning crypto sector, as stakeholders grapple with the potential economic fallout of regulatory changes.
The Clarity Act, hailed by proponents as a long-overdue framework to legitimize and boost cryptocurrency adoption in the U.S., has been mired in controversy since its introduction.
Designed to clarify rules for digital assets, the bill seeks to end the “regulatory gray area” that crypto executives argue has hampered innovation and growth. Supporters, including industry heavyweights like Coinbase, contend that clear guidelines would foster mainstream integration, potentially unlocking billions in economic activity.
However, the legislation stalled in January amid fierce opposition from the banking industry. At the heart of the dispute is a provision that would permit stablecoin issuers and crypto firms to offer yield-bearing products and customer rewards—features that banks fear could siphon deposits away from traditional institutions. Such a “deposit flight” could undermine banks’ ability to fund loans, a cornerstone of the broader economy.
A recent estimate from Standard Chartered projected that stablecoins alone could drain up to $500 billion from U.S. bank deposits by the end of 2028 if unchecked.
In a bid to salvage the bill, the White House intervened last month, proposing a middle-ground solution, according to sources familiar with the private discussions. The compromise would allow rewards for specific activities, such as peer-to-peer payments, but prohibit them on idle holdings to mitigate risks to bank liquidity.
Crypto companies, initially resistant, have signaled acceptance of this framework, viewing it as a step toward competitive parity. “We need these tools to attract and retain customers,” a Coinbase representative has previously stated, emphasizing that outright bans would stifle competition.
Banks, however, remain unmoved. Two sources involved in the talks confirmed that lenders have outright rejected the proposal, insisting on stricter limits to prevent any significant erosion of their deposit base.
A senior White House official described the banks’ stance as overly restrictive, while a banking industry insider countered that even the compromised activities could trigger substantial outflows. “The risks are too high,” the source said, adding that some senators aligned with the banks believe they can leverage their influence for more favorable terms.
President Trump, who has made crypto reform a signature issue in his second term, wasted no time in responding. Fresh off the campaign trail, where he actively solicited support from the crypto community—and amid reports of his family’s gains from their own digital token—Trump vented on Truth Social Tuesday evening.
“We are not going to allow them to undermine our powerful crypto agenda,” he posted, accusing banks of obstructionism. The president’s involvement highlights the political stakes: Trump has positioned himself as a crypto champion, contrasting with more skeptical voices in Congress.
The American Bankers Association (ABA) defended the industry’s position in a statement, asserting that banks have provided “constructive ideas” to move the bill forward without jeopardizing financial stability. “The risks to economic growth and financial stability are real if policymakers don’t get this right,” the ABA said, echoing concerns about broader systemic implications.
Analysts and insiders now doubt the bill’s passage this year, citing the deadlock alongside other hurdles. The legislation must still navigate disagreements over ethics rules and measures to combat illicit finance in crypto.
With Senate floor time dwindling ahead of lawmakers’ summer recess and the November midterms, momentum is fading. The Senate Banking Committee, which oversees the bill’s language, declined to comment.
Compounding the challenges, a shift in congressional control could further dim prospects. If Democrats gain seats in the midterms, their internal divisions on crypto—ranging from cautious support to outright wariness—might fracture any bipartisan coalition. Republicans, under Trump’s influence, have generally been more bullish on deregulation, but the banking lobby’s sway cuts across party lines.
As the standoff persists, the crypto industry finds itself in limbo. Executives warn that prolonged uncertainty could drive innovation overseas, while banks argue that hasty reforms risk destabilizing the financial system.
WHAT YOU SHOULD KNOW
The Clarity Act, a major U.S. crypto reform bill backed by President Trump, now faces serious doubt of passing in 2026. The decisive roadblock is the banking industry’s firm rejection of the White House compromise on stablecoin rewards—lenders insist any allowance risks massive deposit flight, and they currently hold enough Senate support to block or force tougher terms. Without a breakthrough soon, the legislation is unlikely to become law this year.
