US banks pay depositors 0.39% on average. Big ones go as low as 0.01%. Meanwhile, stablecoin issuers hold T-bills earning 3.6%. If stablecoins could pass that yield to users, banks are in trouble.
So they're trying to make competition illegal.
Last week, Coinbase withdrew support for the CLARITY Act after a 48-hour review of the Senate Banking Committee's draft. @BrianArmstrong posted the objections publicly and (thank God for Coinbase's lobbying muscle) the markup was swiftly postponed.
There are too many issues, including:
- A defacto ban on tokenized equities
- DeFi prohibitions, giving the government unlimited access to your financial
The bill read like a Sith manifesto to crush every American version of the crypto dream.
A de facto ban on tokenized equities
DeFi restrictions that expand government access to financial records
Regulatory authority shifts from CFTC to SEC, reopening the securities law can of worms
Section 404: bans yield payments on stablecoins from issuers, exchanges, affiliates, partners, or any mechanism at all
53 banking associations submitted letters supporting this bill.
It was a coordinated legislative maneuver to protect their margins against a common enemy. Except… they’re watching the wrong opponent.
Banks are so bent on thwarting crypto that they haven't noticed the fintechs flanking them.
Stripe: Acquired Bridge for $1B+, absorbing stablecoin infrastructure that lets any company move, store, and accept digital dollars through a simple API. Then @stripe and @paradigm launched Tempo, a blockchain built specifically for payments. All this, while completely sidestepping accrual of economic value back to legacy networks.
Klarna: Issued the first bank stablecoin on @tempo. KlarnaUSD is in testnet now, with mainnet coming this year. This is a company with 114M customers, $112 billion in annual volume, a Swedish banking license, and $14B in deposits. Their CEO, @klarnaseb went from crypto skeptic to launching his own stablecoin in under two years.
PayPal: Launched a stablecoin and hit $3.7B market cap, up 680% YoY. pyUSD is now integrated with YouTube creator payouts, Visa Direct, and AI infrastructure financing.
paypal, stripe and klarna shipped stablecoin and onchain payments infra throughout this year.
they've created entirely new stacks from the ground up while banks snoozed.
expect more headlines like this in 2026.
Visa: Currently settles $3.5 billion annually in USDC, integrated live on Solana with Cross River Bank and Lead Bank. Oh, and they’re also building a validator node on Circle's @arc blockchain. When you’re moving $15 trillion a year, the cost savings from stablecoin infrastructure start to add up quickly.
Why are these payment giants all building sovereign rails, i.e. their own chains, their own stablecoins, their own settlement layers?
It’s strictly business.
"Each dollar of deposit withdrawal can lead to a more-than-one-dollar contraction in lending as institutions rebalance to meet liquidity, leverage, and capital requirements."
- December 2025 Fed FEDS Note ("Banks in the Age of Stablecoins")
Onchain rails are so much cheaper than regular FX routes that a mere 10-20 basis points saved annually is worth billions in extra profits for a company like Visa. And when you own the rails, you own the float and can squeeze out another 3-4% yield.
Put simply, these are the stakes:
Own the stablecoin, and you own the yield
Own the yield, and you can get creative with pricing and scale
The CLARITY Act makes more sense when you see the three sides in this race.
Banks want to shut the door on tokenization. But that's a tall order when:
@NYSE just announced a historic restructuring to enable 24/7 trading of tokenized assets
NYSE's parent company (ICE) invested $2B in Polymarket
Every major financial institution is racing to tokenize something
NYSE’s new digital platform will enable tokenized trading experiences, including 24/7 operations, instant settlement, orders sized in dollar amounts, and
The New York Stock Exchange Develops Tokenized Securities Platform
The New York Stock Exchange, part of Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of technology and data, today announced its devel...
Crypto lobbies (Coinbase & Circle) are fighting for regulatory clarity.
For them, this is yet another trial by fire.
CLARITY as written threatens the entire @base product roadmap. The super-app vision spanning issuance, wallets, payments, AI agents, and social networking gets kneecapped in infancy.
Brian Armstrong, @iampaulgrewal, and the Coinbase policy team are in for another grinding fight. Not their first rodeo. Probably not their last, either.
"System Update" is a new product launch series where Coinbase shares everything they've built over the past few months.
if you want to save 1 hour, catch the highlights here
x.com/coinbase/statu…
— Exciting product announcements
— Key business updates
— Lots of other cool stuff
x.com/i/broadcasts/1…
Fintechs are the wild card everyone's ignoring.
Stripe, Klarna, PayPal, and Visa aren't waiting for either side to win. They're building parallel infrastructure, so that when the dust settles, they'll already have rails in production.
Banks see one opponent on the board, when in fact, there are two.
I might be looking at this wrong.
Maybe banks aren’t playing to win, but they just don’t want to lose.
Banks don't need to kill tokenization to survive. They need to delay it.
In a world where CLARITY stalls, the Senate markup stays on the back burner while the bill gets revised and stonewalled ad nauseam.
Meanwhile, JPMorgan keeps building Onyx. BNY keeps tokenizing. State Street partners with Galaxy for a fund on Solana. Banks can just keep lobbying while building their own infrastructure in the background.
And the fintechs? They keep shipping.
Tempo goes live. KlarnaUSD moves to mainnet. Visa settles more volume in USDC. Every month the bill sits in committee, the parallel rails get stronger.
It’s attrition warfare: delay the legislation, build in the background, acquire the fintechs if they grow too big or they have what you can't build, and wait for a regulatory window that suits you.
There’s a chance the CLARITY Act is nothing more than a stalling tactic for a scenario described by the Assistant VP of the Kansas City Fed:
"This potential flow of funds from bank deposits into stablecoins could increase Treasury demand but also could reduce the supply of loans in the economy."
- Stefan Jacewitz, Kansas City Fed.
But stalling only works if your opponents are waiting too.
The fintech-bank-issuers aren't.
Not because of ideology or innovation theater, but because money always flows to where it earns more. The only race that matters now is to own the rails when it finally does.
Watch who sides with banks on this bill.
Watch which politicians back Section 404.
Watch which voices frame yield prohibition as “consumer protection” instead of margin preservation.
And then ask yourself: when the infra wars end and the new rails are built, on what side of history would you rather stand?
-- IB.