Discussions on crypto legislation have hit a new barrier after banks said they could not back a compromise pushed by the White House, casting doubt on whether the bill will pass this year, and sparking criticism from President Donald Trump, who accused lenders of trying to undermine it.
Trump, who courted crypto cash on the campaign trail and whose family has profited from its own token, has prioritised crypto reform during his second administration.
On Tuesday evening, he took to his Truth Social platform to call out the banking industry. “We are not going to allow them to undermine our powerful Crypto Agenda,” he posted.
Crypto companies have been operating in a regulatory gray area, which executives say has stymied their businesses.
The Clarity Act bill aims to create clear regulations that should help promote cryptocurrency adoption, say its supporters.
The bill stalled in January because banks opposed a provision allowing stablecoin issuers and crypto firms to offer yield-bearing products and other rewards that could lure away bank deposits, making it harder for them to fund lending, Reuters reports.
Crypto giants such as Coinbase say they must be able to offer rewards to recruit customers, and barring them would be anticompetitive. The bank Standard Chartered has estimated, meanwhile, that stablecoins could pull around $500 billion in deposits out of U.S. banks by the end of 2028.
The White House last month stepped in to broker a deal. Its compromise would allow stablecoin rewards in some circumstances, such as peer-to-peer payments, but not on idle holdings, said four people who asked for anonymity to discuss the private talks.
Crypto companies have come around to that compromise, but banks have said they cannot support it, two of the people told Reuters. Banks still want to severely limit activities for which rewards can be issued, according to a senior White House official.
A banking industry source also told Reuters that lenders believe the activities allowed under the compromise could still trigger deposit flight.
Some senators back the banks’ position, and the industry believes that with their support, it can get a better deal, the banking source said. A spokesman for the Senate Banking Committee, which ultimately holds the pen on the text, did not provide comment.
In a statement, the American Bankers Association said lenders had offered constructive ideas to advance the bill without imperiling deposits. “The risks to economic growth and financial stability are real if policymakers don’t get this right.”
The deadlock has fed doubts about whether the bill will make it into law this year, the sources and analysts told Reuters. The bill must also overcome disagreements among senators over ethics and illicit finance provisions, and Senate floor time is limited before lawmakers leave Washington in the summer to start campaigning for the mid-term elections.
Chances for passing a crypto bill would shrink further if Democrats gain seats in the U.S. Congress in November, since Democratic lawmakers are more divided on overhauling federal rules to accommodate cryptocurrencies.
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“If this doesn’t get passed and put in front of the President’s desk, I’d say by July, I think everyone feels that, generally, that window will have been closed because of the mid-terms,” said Adrian Wall, managing director of the Digital Sovereignty Alliance, which advocates for pro-crypto policies.
“It will be a tremendous setback that will be very difficult for us to overcome.”
‘PATH TO A WORKABLE AGREEMENT’
For years, crypto companies have campaigned for legislation establishing when crypto tokens are legally considered securities, commodities, or otherwise. The industry spent more than $119 million backing pro-crypto candidates in 2024, hoping to advance the Clarity Act and a separate bill paving the way for wider stablecoin adoption, which became law last year.
That law banned stablecoin issuers from paying interest, but banks say it created a loophole that allowed crypto exchanges and other intermediaries to offer rewards, and they want the Clarity Act to eliminate that.
In addition to the ABA, executives from Coinbase and Ripple, and trade groups from both industries, including crypto group the Blockchain Association, have been involved in the talks, the sources said.
In a statement, Summer Mersinger, CEO of the Blockchain Association, said: “The path to a workable agreement is clearer than it was a month ago.”
Ripple did not provide a comment, but it has publicly cheered the White House’s efforts to get a deal.
FURTHER CHALLENGES AHEAD
To pass, the bill needs support in the Senate from at least seven Democrats. Some Democrats want the bill to ban elected officials from profiting from crypto ventures. That provision is aimed at the Trump family’s World Liberty Financial, and Trump is unlikely to sign it into law, analysts speculate. Other lawmakers have called for the bill to include tighter anti-money laundering rules.
Once those issues are resolved, the Senate Banking draft must be reconciled with a Senate Agriculture Committee draft, and the final version must then compete for floor time with other bills, including housing policy reform, another Trump priority.
The war in Iran is making it even harder to pass the crypto bill this year, Brian Gardner, chief Washington strategist at Stifel, wrote in a Tuesday note.
“The calendar is becoming the enemy of this bill,” he added.
