Negotiations on a major crypto regulatory package have encountered a fresh deadlock after banks declined to support a compromise proposal that the White House quietly brokered, people familiar with the talks said. The reversal has cast doubt on whether the Clarity Act - legislation aimed at establishing clearer federal rules for cryptocurrencies and related services - can reach the president's desk this year.
President Donald Trump, who made outreach to the crypto community part of his campaign and whose family has profited from its own token, has prioritized reforms for digital asset markets during his second term. On Tuesday evening he criticized the banking industry on his Truth Social platform, writing: "We are not going to allow them to undermine our powerful Crypto Agenda."
Supporters of the bill say it would end a prolonged period of regulatory ambiguity that has hampered crypto firms. The Clarity Act is designed to define when tokens are treated as securities, commodities or other categories and to create a framework they say would encourage broader adoption.
The current impasse stems from a provision that became a major sticking point in January. Banks objected to language that would permit stablecoin issuers and crypto platforms to provide yield-bearing products and other rewards, arguing such offerings could draw deposits away from traditional banks and diminish their ability to fund lending.
Executives at major crypto firms, including leading exchanges, say the ability to offer rewards is necessary to attract and retain customers; they contend that prohibiting such incentives would saddle them with an uncompetitive hand. Industry research cited in talks has suggested the potential scale of the issue - the bank Standard Chartered estimated stablecoins could pull roughly $500 billion in deposits out of U.S. banks by the end of 2028.
According to sources with direct knowledge of private negotiations, the White House tried to narrow the gap last month by proposing a limited compromise. That proposal would allow certain stablecoin-related rewards in narrowly defined cases - for example, for peer-to-peer payment use-cases - while barring rewards on idle holdings. Four people who requested anonymity to describe the closed-door discussions provided this account.
Crypto firms have largely accepted the White House's narrower approach, the sources said. Banks, by contrast, told negotiators they could not support the compromise, according to two people involved in the talks. Industry representatives argue that even the more circumscribed permissions could still set the stage for deposit outflows, and lenders continue to press for much tighter limits on the activities eligible for rewards, a senior White House official said.
Some senators have aligned with banking industry concerns, and lobbyists for the sector believe that with those lawmakers' backing they can extract stricter terms from negotiators, according to a banking industry source. The Senate Banking Committee, which controls the drafting and final language in its jurisdiction, did not provide comment through a committee spokesman.
The American Bankers Association, in a statement, said banks had proposed constructive alternatives intended to advance the bill without creating deposit risk. "The risks to economic growth and financial stability are real if policymakers don’t get this right," the statement said.
Legislative hurdles beyond the rewards dispute
Sources and analysts flagged several other obstacles that reduce the likelihood the Clarity Act will become law this year. Lawmakers remain divided on ethics provisions and anti-money laundering measures. Senate floor time is constrained as lawmakers will leave Washington in the summer to begin campaigning for the mid-term elections, compressing the window for major legislative achievements.
Passage in the Senate would require bipartisan support, including at least seven Democrats, a threshold that observers say is not assured. Some Democratic senators are pushing for a provision that would bar elected officials from profiting from crypto ventures - a measure directed at entities such as the Trump family's World Liberty Financial. Analysts quoted in the talks say the president is unlikely to sign such a provision into law.
Other Democrats have sought tougher anti-money laundering language before casting votes. And even if the Senate Banking Committee produces a viable draft, that text must be reconciled with a separate version from the Senate Agriculture Committee. The final unified bill would then compete for priority on the Senate floor against other items, including housing policy changes that are also on the administration's agenda.
Beyond internal legislative disputes, external events have complicated timing. Brian Gardner, chief Washington strategist at Stifel, wrote in a note that developments related to the war in Iran were making it more difficult to advance the bill this year. "The calendar is becoming the enemy of this bill," he wrote.
Industry effort and political context
For years the crypto sector has pushed for statutory clarity defining legal classifications for tokens and services. The industry invested heavily in the 2024 election cycle to elect sympathetic lawmakers, spending more than $119 million backing pro-crypto candidates with the goal of advancing the Clarity Act and other measures.
Last year Congress enacted a separate law to promote wider stablecoin use; that measure prohibited stablecoin issuers themselves from paying interest. Banks contend that the prohibition created a loophole that third-party exchanges and intermediaries have exploited to offer rewards, and they want the Clarity Act to close that gap.
Negotiations have involved a range of stakeholders. In addition to the ABA, executives from major crypto firms and trade groups from both the banking and crypto industries participated in the talks, sources said. The Blockchain Association's CEO, Summer Mersinger, stated that "the path to a workable agreement is clearer than it was a month ago." Ripple, which has publicly supported White House efforts, did not provide comment for this report.
Outlook and timing
Analysts and industry advocates say the bill's prospects hinge on whether negotiators can reconcile the banks' deposit concerns with crypto firms' need for competitive tools to attract customers. Adrian Wall, managing director of the Digital Sovereignty Alliance, which lobbies for pro-crypto policies, warned that failing to pass a bill by mid-summer would likely foreclose this year's window. "If this doesn’t get passed and put in front of the President’s desk, I’d say by July, I think everyone feels that, generally, that window will have been closed because of the mid-terms," he said. "It will be a tremendous setback that will be very difficult for us to overcome."
For now, the talks remain in limbo. Banks say they will press for stringent limits on rewardable activities, some senators continue to seek ethics and anti-money laundering changes, and the compressed legislative calendar and competing priorities create additional uncertainty about whether Congress can resolve the remaining differences and pass a unified bill this year.