Insights on the Stalled CLARITY Act in Crypto Legislation
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Federal Reserve and the CLARITY Act: A Legislative Impasse
Federal Reserve (Fed) Governor Christopher Waller recently expressed concerns about the stalled progress of the CLARITY Act, the much-anticipated crypto market structure legislation, in Congress. His observations highlight a significant divide among lawmakers on critical issues, particularly regarding stablecoin yield provisions and the Federal Reserve’s proposal for “skinny” master accounts. This topic was previously emphasized by Crypto In America.
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Stablecoin Yield Debate Intensifies CLARITY Act Standstill
Waller’s statements have sparked discussions among market analysts. Crypto analyst MartyParty shared on X that the governor’s insights reflect the entrenched deadlock surrounding the CLARITY Act. MartyParty suggests that the delay is not coincidental. He believes opposition from the banking sector has grown, mainly around the handling of stablecoin yields and rewards.
Central to the dispute is the question of whether cryptocurrency platforms, such as exchanges and digital wallets, should have the ability to offer interest-like returns or incentives on stablecoins held by users. Proponents from the crypto industry argue that yield-bearing stablecoins promote adoption, enhance efficiency, and foster competition in the payments market. Conversely, banking institutions strongly contest this perspective.
They assert that stablecoin yields directly threaten traditional bank deposits, cautioning that higher returns—often ranging from 3% to 5% or more, compared to near-zero yields on many bank accounts—could trigger substantial deposit outflows. MartyParty posits that banks fear the potential passage of the CLARITY Act could channel trillions of dollars onto crypto-based payment systems, disrupting the banking sector’s “closed-loop system” and challenging established profit structures.
White House Reopens Dialogue Between Crypto and Banks
In response to escalating tensions, MartyParty reports that the White House has scheduled another meeting for Tuesday, February 10, aimed at alleviating friction between cryptocurrency firms and banks regarding stablecoin yield payments. This meeting is set to involve senior policy officials instead of company CEOs, along with representatives from banking and crypto trade associations.
An additional contentious issue is the Federal Reserve’s proposed “skinny” master account model. Under this plan, eligible fintech and crypto companies would gain limited access to the Fed’s payment systems without obtaining full banking privileges.
The debate over skinny accounts has been underscored by 44 comment letters submitted to the Federal Reserve. Generally, crypto firms and industry groups have shown support, while banking entities have expressed caution or outright opposition. Banking organizations have raised concerns about oversight and risk management. The American Bankers Association (ABA) highlighted that many entities likely to qualify for payment accounts lack a long-term supervisory history and are not subjected to consistent federal safety standards.
Governor Waller remains hopeful that the Federal Reserve will release proposed regulations for skinny master accounts in the fourth quarter of this year.
Current Market Overview
As of Monday, the total crypto market cap stands at $2.35 trillion, reflecting the ongoing dynamic nature of the cryptocurrency landscape.
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