White House reportedly pressuring banks over crypto bill impasse
A meeting at the White House on Thursday to negotiate passage of the US Senate Banking Committee's CLARITY Act crypto bill once again ended with participants claiming that "progress" had been made, but with no resolution to the impasse between the banking and crypto industries that is helping to keep negotiations at a standstill.
This was the third meeting on the issue to be hosted by Patrick Witt, President Trump's chief advisor for digital assets.
After President Trump signed the GENIUS Act into law in June, establishing the first legislation regulating stablecoins in the US, confidence was soaring in the crypto industry about achieving long-sought-after regulatory clarity for digital assets.
But creating a legislative framework around the broader crypto market infrastructure in the US through the CLARITY Act has proven much more elusive.
Although both pieces of legislation have broad bipartisan support in Congress, the CLARITY Act is proving much harder to get over the finish line, with the issue of stablecoin rewards being the main sticking point between the banks and the crypto industry.
Senate Banking Committee Chair Tim Scott decided to delay a vote on the bill after Coinbase Global (COIN) said that it could no longer support the committee's draft, with CEO Brian Armstrong citing several issues, but most notably "amendments that would kill rewards on stablecoins, allowing banks to ban their competition."
Bank lobbyists have been pushing lawmakers to ban what they call a "loophole" that crypto companies are exploiting in the GENIUS Act's stablecoin law by offering rewards, while citing a recent report from the Treasury Department that said stablecoin rewards offered by the crypto industry could drain as much as $6.6 trillion in deposits from the U.S. banking system.
Armstrong claimed in a post on X following last week's meeting at the White House that the market structure bill "is making great progress, and I believe we're going to reach a win-win-win outcome."
Details on what this "progress" entails are unclear, but a response to Armstrong's post about reaching this "win-win-win outcome" from Paul Grewal, chief legal officer for Coinbase, appears to show that the bad blood between the banks and the crypto industry still remains after the latest meeting.
“If we don’t, it’s going to be crystal clear why,” Grewal said. “And that why won’t be a lack of good faith by crypto.”
US Treasury Secretary Scott Bessent seemed to cast blame for the CLARITY Act's impasse on Coinbase in a recent interview with Fox Business.
"We've got a few recalcitrant actors who said, 'well, it's better to have no legislation than the legislation we don't want,' and I think both the banks and the other crypto firms are united against them,” he said.
Bessent was referring to Armstrong saying on X that Coinbase would "rather have no bill than a bad bill."
White House pushing to get bill done
However, after last week's meeting, it appears the White House might now be putting pressure on the banking industry, according to widely followed crypto investor, analyst and journalist Paul Barron.
“Just heard from my DC sources: The White House is now leaning on banks, and the banks are holding the CLARITY Act hostage,” Barron said in a post on X. “They continue to want to ban stablecoin yield because they’re scared of competition. I expect them to cave soon.”
Meanwhile, crypto podcaster and journalist Eleanor Terrett said that her sources told her that one "notable difference" in this latest meeting was that "the White House took the lead in driving the discussion, rather than letting crypto firms and bank trades steer the discussion, as in prior meetings."
"One crypto-side attendee told me bank concerns appear to stem more from competitive pressures than from deposit flight, which had been framed as the original worry," Terrett said. "A bank-side source told me they’re still pushing to include a deposit outflow study in the draft — one that would examine the growth of payment stablecoins and their potential impact on bank deposits."
Despite the ongoing impasse, Ripple CEO Brad Garlinghouse, who was a participant in Thursday's meeting, said that there is a 90% chance the CLARITY Act gets passed by the end of April.
But even if the banks and crypto industry reach a compromise, there remains another significant roadblock that has not been resolved: Democrats in Congress are seeking a provision that would address potential conflicts of interest in order to prevent politicians from profiting off their crypto holdings while the federal government is also regulating the markets.
This provision still does not exist in the current draft of the Senate Banking Committee's bill.