Crypto entered 2026 asking Washington for one rulebook. It reached the Senate vote divided over a harder question: who should profit when digital dollars sit idle?
The industry agreed that it needed clearer rules. It could not agree on how much of its existing business should be surrendered to obtain them.
Key Takeaways
- The CLARITY Act failed to receive the 60 Senate votes required to advance.
- Stablecoin rewards became a fight over competition between crypto platforms and banks.
- Crypto leaders disagreed over whether an imperfect bill was better than no bill.
- Ethics, banking and other policy disputes also contributed to the failure.
The vote exposed more than a partisan divide
The Senate voted 50-49 in favor of advancing the CLARITY Act on September 15, but the procedural motion required 60 votes. Four Republicans joined all voting Democrats in opposing the motion, leaving the legislation effectively frozen before the midterm elections.
The CLARITY Act’s failed Senate vote did not reject the bill on final passage. It prevented the Senate from opening debate, closing the legislation’s most realistic path forward this year.
A September 20 Wall Street Journal account describes how months of negotiations weakened the group supporting it. The fight over stablecoin rewards became particularly damaging because it involved a central part of how exchanges attract customers and compete with banks.
Why stablecoin rewards became a fight over business models
Stablecoins such as USDC are designed to track the value of the US dollar. The tokens do not automatically pay interest, but exchanges and other platforms can offer customers rewards for holding or using them.
The GENIUS Act, enacted in 2025, prohibited stablecoin issuers from paying yield directly to holders. It left more room for separate platforms to fund rewards from their own revenue.
The distinction between passive yield and activity-based rewards became central to the CLARITY negotiations. Banks wanted tighter limits on programs that could make stablecoin balances resemble interest-bearing accounts. Crypto companies warned that broad language could also restrict cashback, loyalty programs and incentives tied to payments or other customer activity.
The disputed wording would help determine whether exchanges could continue competing with banks for customers’ dollar balances. A narrow restriction would preserve rewards linked to genuine activity. A wider one could treat almost any economic benefit as a form of prohibited interest.
Banks justified tighter limits by warning that rewarded stablecoins could drain deposits and reduce lending. The administration’s own modelling questioned the likely scale of that effect.
A White House analysis published in April estimated in its baseline model that eliminating stablecoin yield would increase bank lending by around $2 billion. That represented an increase of approximately 0.02%, including roughly $500 million in additional lending by community banks.
The model cannot predict exactly how consumers or banks would respond as the stablecoin market grows. Its estimate nevertheless weakened the argument that a reward ban would immediately protect a large share of bank lending.
Crypto leaders agreed on rewards, but not on compromise
The industry’s public comments show broad opposition to a blanket reward ban. The split concerned tactics: whether to accept an imperfect framework, keep negotiating or withhold support until the bill changed.
Armstrong rejected the January draft
Coinbase CEO Brian Armstrong withdrew the exchange’s support in January. His objections covered more than stablecoins: he also raised concerns about tokenized equities, decentralized finance, financial privacy and the Commodity Futures Trading Commission’s authority. “We’d rather have no bill than a bad bill,” Armstrong wrote in the statement covered by Reuters. The Senate Banking Committee postponed its planned markup shortly afterward.
Armstrong used Coinbase’s support as leverage. His position was that legal certainty would have little value if the legislation removed products and protections that the exchange considered essential.
Allaire defended rewards without abandoning the wider effort
At Davos in January, Circle CEO Jeremy Allaire defended platform rewards while speaking favorably about the broader legislative effort then under negotiation. Allaire compared stablecoin incentives with loyalty benefits already offered in payments, brokerage, ecommerce and credit cards. His argument, reported by the Wall Street Journal, was that companies using stablecoin technology should retain room to build similar programs.
Circle’s priority was expanding the use and distribution of USDC. Coinbase also needed the ability to make holding USDC attractive to retail customers. Both companies opposed sweeping restrictions, but Armstrong was more willing to withdraw support from the wider package.
Mersinger warned that the remaining time was disappearing
By August, Blockchain Association CEO Summer Mersinger was focused on preserving the bill’s route through Congress. She argued that demands from banking groups to reopen negotiated rewards language would restart a discussion the Senate had little time to finish.
Mersinger described the proposed changes as “a delay to kill the legislation.” Her concern was that another dispute over wording would consume the remaining weeks before the September vote. The contrast was clear. Armstrong treated the threat of withdrawal as negotiating pressure. Allaire defended rewards while remaining more positive about the wider framework. Mersinger prioritized keeping a negotiated bill alive before the legislative window closed.
Ethics and banking concerns left no easy compromise
Stablecoin rewards exposed the industry’s internal tensions, but resolving that issue alone would not have guaranteed 60 votes.
Democrats wanted stronger restrictions on elected officials and their families profiting from crypto businesses. Some lawmakers also raised concerns about anti-money-laundering safeguards and consumer protection. Republican opposition included senators responding to community banks worried about deposit competition. The bill expanded beyond 600 pages as negotiators tried to define rules for exchanges, token issuers, banks, decentralized protocols, securities platforms and public officials. Every compromise resolved one objection while creating another for a different part of the market.
Crypto companies entered the process under one industry label, but they were protecting different sources of revenue. Exchanges cared about rewards and trading rules. Stablecoin issuers wanted distribution. Protocol developers wanted protections for decentralized software. Those interests overlapped without becoming identical.
Regulators can move, but Congress left important gaps
After the vote, Armstrong said the SEC and CFTC could use their existing authority to provide clearer rules. Both agencies have already started moving in that direction. The CFTC sent a crypto market proposal to the White House for review shortly after the Senate setback. The SEC separately introduced a conditional route for certain platforms offering tokenized US stocks.
Agency action may arrive faster than another congressional negotiation. It cannot settle every jurisdictional question that the CLARITY Act was designed to resolve, and future administrations could reverse or rewrite many of the resulting policies.
Companies may therefore receive workable rules without gaining the permanent legal framework they spent years seeking. The largest firms can adapt to that uncertainty more easily than smaller businesses deciding whether to launch products in the United States.
The next attempt may need smaller deals
The failed vote suggests that another single package could become overloaded with the same disputes. Stablecoin rewards, decentralized finance, tokenized securities and political ethics each affect different groups and may require separate compromises. Dividing those issues would sacrifice the appeal of one comprehensive crypto law. It could also make the trade-offs easier to see and prevent one unresolved business-model dispute from blocking rules that already have broader support.
Until the industry decides which protections are essential and which are negotiable, Washington will continue hearing a shared demand for clarity from companies asking for very different versions of it.
This article is provided for informational purposes only and does not constitute legal, financial or investment advice. Legislative proposals and regulatory positions may change.
Kosta has reported on cryptocurrency markets and blockchain infrastructure since 2020, bringing over six years of hands-on experience in the crypto industry built through daily tracking of markets, trends, and emerging blockchain developments. Specializing in Bitcoin on-chain analysis, institutional ETF flows, and digital asset price action, his work at Coindoo has been cited by other news agencies and consistently covers market developments with a focus on data-driven reporting across Bitcoin, Ethereum, Solana, and XRP.
Over the years, Kosta has contributed to multiple crypto media outlets in different regions, authoring over 6,000 articles across the sector. His reporting spans cryptocurrency markets and the broader fintech industry, tracking not only price action but also the technological and regulatory forces shaping the ecosystem.
To support his analysis, Kosta actively leverages on-chain data and metrics from leading platforms such as Santiment, Glassnode, and CryptoQuant, enabling deeper, evidence-based market insights. He believes in the power of transparency and the data that underpins the blockchain ecosystem.
His academic background in Marketing Management from Denmark further complements his analytical approach, adding a strong understanding of communication strategy and content positioning to his work.
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