Economist and prominent cryptocurrency critic Peter Schiff has highlighted a significant power imbalance in Washington, declaring that the traditional banking lobby has successfully outweighed the influence of the crypto industry in shaping new stablecoin regulations. The clash centers on the Clarity Act, a bill currently under consideration in the US Congress, which includes provisions that would legally prevent stablecoin issuers from paying interest to their users.
According to Schiff, this regulatory outcome represents a decisive victory for banks and a structural setback for crypto innovation. He argued that while this arrangement allows issuers to retain the interest income earned from reserve assets, the ability to share that yield with users would have attracted a much wider customer base and accelerated adoption across both retail and institutional segments. "The banking lobby is still stronger than the crypto lobby," Schiff stated on X, adding, "Issuers won't be allowed to pay interest on stablecoins. While that allows issuers to keep the interest for themselves, sharing it would have meant a lot more customers."
The proposed rules, introduced as part of a Senate compromise, would only permit "activity-based rewards" rather than traditional yield on stablecoin balances. This directly impacts major products like Circle's USDC, limiting their functionality as yield-generating instruments. Following the announcement, Circle's stock declined by approximately 15%, reflecting investor concerns about reduced growth potential.
The crypto industry is pushing back strongly against the legislation. Coinbase has openly opposed the revised compromise, informing lawmakers it cannot support the bill in its current form due to concerns over its long-term impact. Traditional banks have consistently opposed yield-bearing stablecoins, fearing customers would shift deposits away from conventional accounts into digital assets offering higher returns, which would directly impact bank liquidity.
Schiff suggested that these developments could increase investor interest in alternative assets like tokenized gold. Meanwhile, the Trump administration has expressed confidence that ongoing negotiations will produce a workable outcome, with senior advisor Patrick Witt describing the market reaction as driven by "uninformed fear" while maintaining an optimistic outlook. Experts emphasize that the final regulatory framework will be critical to the future of the stablecoin market, with decisions made in the US likely to have significant effects on global crypto markets.
