The CLARITY Act, a comprehensive crypto market infrastructure bill, has stalled in Senate Banking deliberations, delaying critical market rules that would solidify the pro-crypto stance of the Trump administration. This delay has created an unexpected experiment: a live market test of Wall Street's warning that stablecoin rewards could drain up to $6.6 trillion in bank deposits.
The core dispute centers on whether stablecoin holders can earn yield or interest, a provision that legacy banks argue threatens their business model by forcing them to compete for deposits. The Independent Community Bankers of America (ICBA) released a poll claiming that 65% of Americans want policymakers to ensure digital asset policy does not harm bank lending, and 74% value banking with a local, regulated institution. The banking sector has lobbied heavily against the CLARITY Act, using this fear as a primary argument.
Patrick Witt, the White House Executive Director of the President's Council of Advisors for Digital Assets, publicly rebutted the ICBA, stating that an outright prohibition on stablecoin rewards is 'dead on arrival' and that the lobbying group is doing its members a 'huge disservice.' He argued that if the ICBA succeeds in defeating CLARITY, the alternative would be control under the GENIUS Act, which he suggests would be even worse for them.
The GENIUS Act explicitly bars stablecoin issuers from paying interest solely for holding a payment stablecoin, but a gray area remains: whether exchanges and third parties can offer cash back, referral bonuses, or promotional yields. The OCC and FDIC have proposed rules extending anti-evasion presumptions to affiliate arrangements, but these are not yet finalized. The American Bankers Association (ABA) warned of up to $6.6 trillion in deposits at risk, while Standard Chartered forecast a more modest $500 billion in outflows by 2028. The White House Council of Economic Advisers rebutted this, finding that eliminating stablecoin yield would increase bank lending by only about $2.1 billion, or 0.02%, while imposing an $800 million welfare cost.
The stablecoin market currently stands at over $320 billion, representing about 1.66% of the $19.1 trillion US commercial bank deposit base. If the market grows to $500 billion with all new funds coming from bank deposits, the displacement would be roughly 0.96%. This scale is enough to test community banks' pricing power without destabilizing the broader system.
If CLARITY stalls and agencies don't close the rewards lane, exchanges can operate in this unsettled area. This would generate real-world data on deposit flows, retail cash allocation, and banks' competitive responses—turning theoretical arguments into evidence. This data would be globally relevant, as the BIS notes that the main cross-jurisdictional split now centers on whether exchanges may offer rewards. A BIS working paper found that a $3.5 billion inflow of stablecoins lowers 3-month T-bill yields by 2.5 to 3.5 basis points, showing stablecoins already connect to the Treasury curve.
If Congress or agencies close the lane before data is generated, the experiment ends. The White House CEA noted the GENIUS framework becomes effective within 18 months of becoming law, limiting how long the gray area can run. The delay also carries structural costs: token classification remains ambiguous, software developers face liability risk, and DeFi protocols operate under contested authority. Deposits leaving banks for stablecoin rewards would flow toward Treasuries, redirecting funding and providing a real-world measure of bank pricing power.
