A Reuters report Thursday warns that the long-anticipated crypto market-structure bill known as the CLARITY Act may fail to become law in 2026 as growing opposition from the banking sector stalls progress — chiefly over how stablecoins and crypto firms would be allowed to offer yield-bearing products and customer rewards. Breaking the compromise According to Reuters, negotiations hit a fresh impasse after banks rejected a White House-brokered compromise designed to narrow the scope of allowable rewards. Under the administration’s proposal, rewards would be permitted only in limited contexts — for example, tied to peer-to-peer (P2P) payment activity — while rewards on idle balances would be banned. Four people familiar with the talks said the offer was intended to balance innovation with deposit stability; crypto firms reportedly accepted it, but banks did not. Why banks object Lenders argue that permitting rewards and other incentives could draw customer deposits away from traditional banks, undermining their ability to fund loans and support credit creation. Some banking sources told Reuters they want far stricter limits on what activities would qualify for rewards, warning even the narrowed framework could accelerate deposit flight and meaningfully weaken banks’ deposit bases. Crypto industry pushback Crypto firms counter that the ability to offer rewards is essential to attract and retain users and compete with incumbent financial institutions. They say banning such incentives would amount to an anti-competitive protection of the banking sector. Political and procedural hurdles Beyond the stablecoin dispute, the CLARITY Act faces additional roadblocks in Congress — disagreements over ethics provisions and illicit finance measures, and simply the scarcity of Senate floor time as lawmakers prepare for the midterm campaign season. Adrian Wall, managing director of the pro-crypto Digital Sovereignty Alliance, warned the legislative window is closing fast: if the bill is not cleared and sent to the president by July, it will be increasingly difficult to regain momentum before the elections. A volatile political calendar and geopolitics The political calculus could shift further after November; a change in congressional makeup might make crypto-friendly legislation harder to pass, analysts say. Geopolitical developments are complicating matters as well: Brian Gardner, chief Washington strategist at Stifel, pointed to the war in Iran as another distraction for Congress, adding that “the calendar is becoming the enemy of this bill.” What’s next With banks, some senators, and parts of the administration still at odds, the CLARITY Act’s path remains uncertain. The debate over how to regulate stablecoin rewards — striking a balance between fostering crypto innovation and protecting the traditional banking system’s deposit base — is likely to be the decisive factor in whether the bill advances before the midterms. Read more AI-generated news on: undefined/news

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