TBW - Clarity Act: Coinbase and JPMorgan clash over the future of stablecoins
The battle over the Clarity Act crystallises a fundamental clash between two giants. On one side, the crypto ecosystem, embodied by Coinbase, which is defending the ability to innovate around stablecoins, including via yield mechanisms.
On the other, the major US banks, led by JPMorgan, which see in these products the emergence of a parallel banking system escaping prudential safeguards.
At the heart of this tug of war: the issue of "stablecoin yield", which has become the red line of political compromise in Washington.
A text that could redefine the stablecoin economy
The Clarity Act aims to provide long-awaited clarification on the structuring of the crypto sector in the United States, notably by dividing powers between the SEC and the CFTC and specifying the conditions for listing and supervising digital assets.
But one of the most sensitive points concerns stablecoins and, more specifically, the possibility of offering a yield to users.
In its most recent version, the text would seek to restrict return programmes offered by issuers and platforms, allowing them only where they are explicitly linked to activities such as staking or transactions akin to loyalty programmes.
The stated aim of the compromise's promoters is to prevent stablecoins from becoming too similar to interest-bearing bank deposits, without being subject to the same capital, liquidity and depositor protection requirements.
This shift marks a break with the spirit of the GENIUS Act, passed a few months earlier, which had set out a framework for stablecoins without resolving the yield issue head-on.
>> GENIUS Act and Clarity Act: The United States adopts 2 historic texts
Coinbase: "Better no law than a bad law"
It was against this backdrop that Coinbase CEO Brian Armstrong publicly took a stand against the text, saying that "better no law than a bad law". For Coinbase, banning or excessively limiting the return on stablecoins would amount to freezing innovation and penalising uses that are nonetheless central to adoption, particularly for on-chain payments and cash management.
The argument is also economic. Revenues linked to stablecoins account for a growing share of Coinbase's turnover, and return programmes are a key lever for retaining users in the face of international competition.
Behind the criticism of the Clarity Act, the exchange defends a vision in which stablecoins are programmable monetary infrastructures, capable of offering new functionalities compared with traditional bank deposits, without necessarily reproducing all the risks.
This hard line is not unanimous in the industry, however. Kraken, through its co-CEO Arjun Sethi, instead supported the text, believing that a rejection of the compromise would prolong regulatory uncertainty and leave US players lagging behind the rest of the world.
JPMorgan: the fear of a "parallel banking system"
In the face of Coinbase, JPMorgan is taking a diametrically opposed stance. When the bank published its quarterly results, its chief financial officer Jeremy Barnum described stablecoin yield products as "obviously dangerous and undesirable". In his view, these mechanisms reproduce the characteristics of interest-bearing bank deposits without fitting into the prudential framework built up over decades of regulation.
The central argument is systemic. By attracting massive flows away from traditional banks, interest-bearing stablecoins could disrupt the structure of deposits, the transmission of monetary policy and, ultimately, financial stability. JPMorgan does not reject blockchain technology (the bank is already developing blockchain and crypto solutions) but asserts that any activity that can be likened to deposit-taking should be subject to the same rules, whether it is carried out by a bank or a crypto platform.
This position has found favour with senators sensitive to the arguments of the banking lobby, helping to tighten the Clarity Act's provisions on yield. It also reveals a broader strategy: to contain the expansion of stablecoins as a credible alternative to bank accounts, while reserving the right to compete with crypto offerings where they genuinely improve the customer experience.
>> M&A: how Coinbase builds its empire through acquisitions
What timetable for the Clarity Act?
In the short term, the future of the Clarity Act is being played out in the Senate Banking Committee, which must examine and amend the text. A simple majority vote is required to get it out of committee, but a withdrawal of support from some Democrats could be enough to bog it down. If passed, the bill would then go to the full Senate for a vote, before a possible reconciliation conference with the version already passed by the House of Representatives.
A number of scenarios remain open. A minimalist compromise could preserve the essence of the text while strictly limiting the yield on stablecoins, at the cost of a rebellion from part of the crypto industry. On the other hand, a blockage in committee would once again postpone the long-awaited regulatory clarification, prolonging the legal uncertainty. In any case, the confrontation between Coinbase and JPMorgan goes beyond the framework of a simple article of law: it symbolises the struggle between two financial models, one based on software innovation and disintermediation, the other on institutional stability and prudential regulation. Whatever the outcome, it will be a revealing rather than a definitive arbiter.
And in Europe? MiCA draws a much stricter line
From a European perspective, the US debate around stablecoin yields appears almost permissive. The MiCA (Markets in Crypto-Assets) regulation, which comes into full effect at the end of 2024, takes a much more conservative approach. For asset-referenced tokens and especially e-money tokens (EMTs), the category that includes stablecoins backed by a fiat currency such as the euro or the dollar, the principle is clear: no direct or indirect remuneration of holders is permitted. The explicit aim is to avoid any assimilation to a deposit or savings product, reserved for the banking sector. Issuers may neither pay interest nor offer economic benefits that can be assimilated to a return, even via devious mechanisms such as systematic cashback.
The only potential income for the user must come from uses external to the stablecoin itself (DeFi, lending, staking), carried out under the user's own responsibility and outside the issuer. In this sense, MiCA endorses the view defended by US banks: a stablecoin is a payment instrument, not an investment product.
