The deal potentially clears the path for a Senate Banking Committee markup that has been stalled since January.
Stablecoin News
Senators Thom Tillis and Angela Alsobrooks released final compromise language on May 2, resolving the stablecoin yield dispute that has blocked the CLARITY Act for months. The deal potentially clears the path for a Senate Banking Committee markup that has been stalled since January. Coinbase CEO Brian Armstrong responded on X with three words: "Mark it up."
The compromise appears as Section 404 of the bill. It bars covered parties from paying any interest or yield to US customers solely for holding stablecoins, or in any form functionally equivalent to interest on a bank deposit. Covered parties are defined as digital asset service providers and their affiliates, though permitted stablecoin issuers and registered foreign issuers are excluded, as both are already barred from paying direct interest under the GENIUS Act.
The prohibition does not extend to activity-based rewards tied to genuine platform usage. The SEC, CFTC, and Treasury Secretary are directed to jointly issue rules within one year defining a non-exhaustive list of permitted activities, expected to cover payments, transfers, market-making, staking, governance, and loyalty programs. In a concession to crypto firms, the bill allows activity-based rewards to be calculated by reference to a user's balance, duration, or tenure, so long as the reward is tied to qualifying activity.
Months of Legislative Gridlock End
The Senate Banking Committee canceled a planned January 2026 markup after Coinbase withdrew support over an earlier version of the yield language. A subsequent draft in late March 2026 sent Circle's stock down 20% in a single session. The May 2 agreement ends a standoff that drew in the White House, the banking lobby, and the broader crypto sector since the start of the year.
Coinbase's commercial stakes are substantial. The exchange reported $1.35 billion in stablecoin revenue in 2025, a large portion of it tied to rewards-driven distribution payments from its USDC partnership with Circle. Coinbase is scheduled to report Q1 2026 earnings on May 7.
The new text bars covered parties from representing that stablecoins are investment products, carry US government backing, or are FDIC-insured. Civil monetary penalties of up to $5 million per violation can be assessed by the Treasury Department, and the SEC, CFTC, and Treasury must jointly issue disclosure rules within one year of enactment.
Within two years, the Federal Reserve, OCC, FDIC, National Credit Union Administration, and Treasury must submit a joint report to Congress on the adoption of dollar-denominated stablecoins, the effect on Treasury yields, and the impact of any customer compensation on bank deposit volumes and concentration. The provision gives the banking lobby a formal mechanism to revisit the issue if deposit outflows materialize.
Senate Banking Committee Chair Tim Scott has not announced a markup date. If the bill clears committee, it must be reconciled with a competing Senate Agriculture Committee version that passed along party lines in January 2026, then aligned with the House's Digital Asset Market Clarity Act, which passed 294-134 in July 2025, before reaching President Trump's desk. Senator Bernie Moreno warned in March 2026 that failure to advance cryptolegislation by May could delay the effort indefinitely.
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