The legislative effort, supported by the president and aimed at establishing more comprehensive regulatory rules for the U.S. cryptocurrency market, is nearing its congressional political deadline. Meanwhile, the banking industry is pressuring lawmakers and regulators to ban stablecoin companies from offering returns similar to bank deposit interest. This struggle has become one of the most central unresolved issues on Washington's crypto agenda. The crux of the dispute is whether dollar-pegged stablecoins should focus on payment and clearing functions or be allowed to develop investment attributes that compete with bank accounts and money market funds. The Senate's market structure bill, the "CLARITY Act," has stalled due to a breakdown in negotiations surrounding so-called "stablecoin yields." Industry insiders and lobbyists say that late April to early May will be the practical window for the bill to move forward if it has a realistic chance of passing before the election year schedule tightens. The Congressional Research Service defines this issue more narrowly than the scope of the public debate. In a report dated March 6, the Congressional Research Service (CRS) pointed out that while the GENIUS Act prohibits stablecoin issuers from directly paying returns to users, it doesn't fully clarify the legality of what it calls the "three-party model"—where intermediaries like exchanges act between issuers and end-users. The CRS stated that the Act's lack of a clear definition of "holder" leaves room for debate regarding whether intermediaries can still transfer economic benefits to clients. This ambiguity is the core reason why the banking industry wants Congress to clarify this in a more comprehensive market structure bill. The banking industry believes that even limited return incentives could make stablecoins strong competitors to bank deposits, particularly impacting regional and community banks. However, crypto companies argue that incentives linked to payments, wallet usage, or online activity can help the digital dollar compete with traditional payment channels and potentially enhance its position in mainstream finance. This divergence reflects differing perceptions of the future positioning of stablecoins. If legislators primarily view stablecoins as payment tools, then the rationale for stricter restrictions on related rewards becomes more compelling. Conversely, if lawmakers view this as part of a major transformation in how value is transferred through digital platforms, then the argument for limited incentives is more compelling. The banking association has urged lawmakers to close what they call "regulatory loopholes" before such reward mechanisms become more widespread. Banks argue that allowing rewards for idle balances could lead depositors to withdraw funds from banks, thereby weakening banks' core funding source for lending to households and businesses.In January, Standard Chartered Bank estimated that stablecoins could draw approximately $500 billion in deposits from the US banking system by the end of 2028, with smaller banks bearing the brunt of the pressure. The banking industry is also attempting to demonstrate to lawmakers that its stance enjoys public support. A recent poll by the American Bankers Association revealed that when asked whether allowing stablecoin yields could reduce banks' lending capacity and impact community and economic growth, 3:1 respondents supported Congress banning stablecoin yields; 6:1 believed that stablecoin legislation should be cautious to avoid disrupting the existing financial system, especially community banks. However, the crypto industry countered that banks are simply trying to protect their funding models by limiting competition in the digital dollar. Industry figures, including Coinbase CEO Brian Armstrong, argue that under the GENIUS Act, stablecoin issuers face stricter reserve requirements than banks—issued stablecoins must be fully backed by cash or cash equivalents. The sheer size of the market has made this yield debate no longer a niche issue. The Boston Consulting Group estimates that the total circulation of stablecoins last year was approximately $62 trillion. However, after excluding bot trading and internal exchange transactions, real economic activity amounted to only about $4.2 trillion. This huge gap between apparent transaction volume and actual economic use explains why the debate over "yields" has become so crucial. If stablecoins are primarily used as clearing tools for transactions and market structures, lawmakers can more easily limit them to payment instruments; but if the yield mechanism turns stablecoins into widely used cash storage tools in user apps, the pressure on banks will increase rapidly. To address this, the White House attempted a compromise earlier this year: allowing partial yields in a few scenarios such as peer-to-peer payments, but prohibiting returns on idle funds. Crypto companies accepted this framework, but the banking industry rejected it, leading to a complete impasse in Senate negotiations. Even if Congress doesn't act, regulators may step in to tighten yield models. The Office of the Comptroller of the Currency, in a proposed rule to implement the GENIUS Act, stated that if a stablecoin issuer provides funds to related parties or third parties, and then those parties pay yields to stablecoin holders, it will be considered a disguised form of issuing prohibited yields. This means that if Congress fails to set the tone through legislation, the executive branch may define the boundaries itself through regulatory rules. Currently, the debate unfolds along two lines: Congress is debating whether to resolve the issue through written law; regulatory agencies are defining the boundaries of corporate behavior within the existing legal framework. For Senate bills, time itself is the biggest pressure.Alex Thorn, head of research at Galaxy Digital, wrote on social media that if the CLARITY Act cannot pass committee review by the end of April, its chances of passing in 2026 will be extremely low. The bill must be sent to the full Senate for a vote in early May. Legislative time is running out, and the probability of passage decreases with each passing day. He also cautioned that even if the yield dispute is resolved, a breakthrough for the bill remains uncertain. Currently, the outside world believes that the stablecoin yield dispute is holding the CLARITY Act back. But even if a compromise is reached on the yield issue, the bill is likely to face other obstacles. These obstacles may include decentralized finance regulation, regulatory authority, and even ethical issues. Crypto regulation is likely to become a larger political battleground before the November midterm elections. This makes the current stalemate more urgent—if the bill is delayed, it will face a more crowded political schedule and a more difficult legislative environment. Prediction markets also reflect this shift in sentiment. In early January, Polymarket gave the bill a probability of about 80% passing; after recent setbacks (including Armstrong's statement that the current version is not feasible), the probability has dropped to nearly 50%. Kalshi data shows that the probability of the bill passing before May is only 7%, and the probability of passing before the end of the year is 65%. The impact of failure goes far beyond the debate over returns. The core purpose of the CLARITY Act is to define whether crypto tokens belong to securities, commodities, or other categories, providing a clear legal framework for market regulation. If the bill is shelved, the entire industry will become more reliant on regulatory guidance, temporary rules, and future political changes. This is one of the reasons why the market is paying close attention to the fate of the bill. Bitwise Chief Investment Officer Matt Hougan stated earlier this year that the CLARITY Act would enshrine the current favorable regulatory environment for crypto into law; otherwise, the government may reverse existing policies in the future. He wrote that if the bill fails, the crypto industry will enter a period of "proving itself," requiring three years to become indispensable to the general public and traditional finance. Under this logic, the future growth of the industry will depend less on the expectation of "legislative implementation" and more on whether stablecoins, asset tokenization, and other products can truly achieve large-scale adoption. This presents the market with two distinct paths: if the bill passes, investors will pre-price the growth of stablecoins and tokenization; if the bill fails, future growth will depend more on actual adoption, while facing the uncertainty of a shift in Washington's policy direction. At this stage, the next decision rests with Washington. If senators can reinstate the market structure bill this spring, they can still define the extent to which stablecoins can transfer value to users and the scope of crypto regulatory frameworks that can be codified into law.If not, regulators are clearly prepared to set at least some of the rules themselves. Regardless of the outcome, this debate has long since moved beyond whether stablecoins belong to the financial system, delving into how stablecoins will operate within it and who will benefit from their development. [Foresight News]