TL;DR
- White House talks chaired by Patrick Witt ended without a yield deal and set an end-February 2026 deadline for a formal joint proposal.
- Section 404 would bar service providers from paying interest or rewards solely for holding payment stablecoins, tightening gaps left after the GENIUS Act.
- Stablecoins exceed $280B, USDC rewards sit near 4.1% APY, and banks warn of $1.3T deposit erosion as Polymarket odds slipped from 65% to 60%.
A session at the White House ended without a compromise on whether crypto platforms can pay yield on payment stablecoins, keeping the CLARITY Act stuck in the Senate workflow. Patrick Witt, executive director of the President’s Council of Advisers on Digital Assets, chaired more than two hours of talks in the Diplomatic Reception Room and set an end-February 2026 deadline for a joint formulation. The White House is treating stablecoin yield as the gating item for moving market-structure rules forward. Without language both sides can sign, the bill stays blocked and timelines keep slipping.
Stablecoin yield standoff deepens
Delegations from Coinbase, Circle, Ripple, Crypto.com, and Kraken joined industry groups like the Blockchain Association, The Digital Chamber, and the Crypto Council for Innovation opposite the American Bankers Association, the Independent Community Bankers of America, the Bank Policy Institute, and the Financial Services Forum. The flashpoint is Section 404, which would bar service providers from paying interest, yield, or rewards solely for holding a payment stablecoin, tightening a gap left after the GENIUS Act banned issuers from paying interest directly. Both sides are now converting red lines into enforceable drafting language with compliance consequences.
Stablecoins have a combined market cap above $280B, which explains why yield has become a high-stakes negotiation. Tether leads at $187B with a 63% share, while Circle sits near $75B and recently grew 73%, outpacing Tether’s 36%. Scott Bessent projects the sector could reach $3.7T by the end of the decade. Coinbase also has direct exposure: stablecoins were nearly 20% of Q3 2025 revenue at $355M under a revenue-share with Circle. USDC currently pays 4.1% APY. Those economics make a yield ban feel like a revenue haircut, not just a policy tweak.
Banks argue yield could siphon deposits and weaken local lending. ICBA estimates allowing intermediaries to pay interest could cut industry deposits by $1.3T and reduce community-bank lending by $850B, while Standard Chartered’s Geoffrey Kendrick models about $500B of outflows by 2028 if stablecoins reach $2T. Crypto groups called the White House meeting a step forward, but Galaxy’s Alex Thorn doubted banks will compromise, and Polymarket odds for passage this year slipped from 65% to 60% after the talks. The near-term deliverable is a joint yield proposal by end-February, or the bill stays effectively frozen.
