Daily News 19

Tag: CLARITY Act

  • DeFi Sector Surges 38% as US Policy Shift Unlocks Token Value Capture

    DeFi Sector Surges 38% as US Policy Shift Unlocks Token Value Capture

    DeFi tokens have risen nearly 38% since August 17 as investors reassess how evolving US crypto policy could affect protocol revenue and token valuations.

    SoSoValue said the rally is bringing decentralized finance closer to a market in which fees, token buybacks and on-chain activity play a larger role in determining value.

    US Crypto Policy Shift Supports DeFi Rally

    In a post on X, SoSoValue said its DeFi sector index, $DEFI.ssi, climbed from 0.3616 on August 17 to approximately 0.498 after reaching 0.511. The move represents a cumulative gain of about 37.7%.

    The rally coincided with recoveries in Bitcoin and Ethereum, as well as broader short covering. However, the research firm said investors are also reconsidering whether mature DeFi protocols can return more of their revenue to tokenholders.

    That question has constrained DeFi valuations for years. Protocols have generated substantial trading fees, lending income and other revenue, while tokenholders often had little direct claim on those economics.

    Fee distributions and token buybacks have also raised potential securities-law concerns in the United States. As a result, many protocols have been reluctant to activate mechanisms that connect revenue directly to their tokens.

    That situation could be changing. Last week, the SEC proposed its “Regulation Crypto Assets” framework, which includes exemptions and a conditional safe harbor for certain crypto-asset offerings.

    Under the proposal, a token may no longer remain part of an investment contract after a project completes or permanently stops the essential managerial work it had promised to perform.

    US Legislation Could Expand DeFi Tokenholder Rewards

    The Senate’s CLARITY Act draft goes further by proposing protections for noncontrolling developers, validators, node operators, oracle providers and self-custody wallet software.

    The draft also leaves room for rewards tied to trading, staking, governance and liquidity provision. It still requires 60 votes in the Senate, while the SEC proposal remains subject to public comment.

    Even so, SoSoValue said markets are already expressing greater confidence in the direction of US crypto policy, despite the lack of complete legal certainty.

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    Protocol Revenue and Buybacks Strengthen DeFi Valuations

    The valuation case for DeFi tokens becomes more compelling when protocol revenue is considered. Uniswap generated approximately $7.18 million over the past 30 days, followed by PancakeSwap with $5.16 million, Jupiter with $4.69 million, Aave with $4.12 million and Aerodrome with $4.11 million.

    Several of these protocols now have mechanisms that connect their revenue to their tokens. Hyperliquid, for example, uses part of its trading fees to buy HYPE. Uniswap has linked revenue to UNI burns, while Jupiter allocates 50% of protocol fees to JUP purchases. PancakeSwap also directs part of its fees toward CAKE buybacks and burns.

    Ethena has proposed an even larger allocation. Once USDe reaches its stated supply threshold, 95% of the net revenue paid to the foundation across its three core business lines would be used for ENA buybacks.

    According to SoSoValue, the next phase of the DeFi token rally will depend on whether protocol revenue continues to grow and whether tokenholders receive a larger share of those economics.

  • Ripple Executive: Clarity Act Could Create More Jobs in the U.S.

    Ripple Executive: Clarity Act Could Create More Jobs in the U.S.

    Ripple Chief Legal Officer Stuart Alderoty has linked the passage of the CLARITY Act to potential job creation and broader economic growth in the United States.

    “A vote for Clarity is a vote for jobs and economic growth,” Alderoty wrote on X.

    His comments follow the release of new research from the National Cryptocurrency Association (NCA) examining the cryptocurrency industry’s contribution to the U.S. labor market. Produced in partnership with Pragmatic Policy Group, the report estimates that the crypto sector will support 232,000 jobs across the country in 2026.

    Approximately 34,000 of those positions are direct jobs at cryptocurrency companies such as Ripple and Coinbase. Suppliers and contractors serving the industry support another 75,000 jobs, including roles at law firms, cloud-computing providers and accounting businesses.

    According to the NCA, the cryptocurrency industry contributes more than $55 billion to the U.S. economy and generates about $31 billion in worker income.

    California leads the country with approximately 57,600 crypto-supported jobs, followed by New York with 53,800 and Texas with 26,500. Washington, North Carolina and Colorado account for 15,100, 9,500 and 5,800 jobs, respectively.

    The study also found that crypto-linked employment offers relatively high wages. Average pay across the jobs included in the report is approximately $133,000, compared with a national median wage of $64,000.

    CLARITY Act remains stalled in the Senate

    The CLARITY Act remains unfinished despite making substantial progress in Congress. The bill passed the House of Representatives by a 294-134 vote in July 2025 before advancing to the Senate.

    The Senate Banking Committee moved the legislation forward in a bipartisan 15-9 vote in May. Senate lawmakers released updated bill language in July.

    Senate Majority Leader John Thune later pushed the planned vote beyond the August recess. A cloture vote is now scheduled for Sept. 15.

    White House officials continue to argue that the CLARITY Act can advance in September. For now, however, the outlook remains unfavorable for crypto bulls.

  • Bitcoin Tops $80K as Crypto Market Flips to Greed—but Is the Rally Misleading?

    Bitcoin Tops $80K as Crypto Market Flips to Greed—but Is the Rally Misleading?

    Crypto market sentiment has shifted sharply in just a few days. After spending months between “Fear” and “Extreme Fear,” the market has now moved into “Greed.”

    At press time, the Crypto Fear and Greed Index stood at 68, placing it in the “Greed” zone. CoinShares’ recent report, ‘From despair to greed in a week: a rally is not a verdict’, highlighted a more favorable environment for Bitcoin’s rally.

    However, the shift does not indicate a fundamental improvement across the entire cryptocurrency industry.

    Source: Alternative

    Why did crypto sentiment change so quickly?

    Jean-Marie Mognetti, CEO of CoinShares, believes conditions surrounding digital assets have become more favorable, particularly for Bitcoin [$BTC]. However, most individual crypto projects have not suddenly become stronger businesses simply because their prices have increased.

    Mognetti put it best when he said:

    This is where the rally becomes more dangerous to interpret.

    Just one month earlier, more than 100 crypto projects had reportedly shut down, entered bankruptcy, or disappeared in 2026. Major industry names were also announcing closures or filing for bankruptcy, creating the impression that the crypto sector was entering another major downturn.

    The situation then changed rapidly. Bitcoin climbed back above $80,000, other digital assets followed, and options traders began placing large bets that Bitcoin could rise above $82,000.

    What is driving the Bitcoin rally?

    Several factors have contributed to the latest crypto market rally. The most prominent was last week’s White House meeting, during which President Trump urged Congress to pass a “fair version” of the CLARITY Act.

    Treasury buybacks, a hawkish tone from the Federal Reserve, and US federal debt surpassing US$40 trillion were additional factors supporting the market’s momentum.

    Despite these developments, the rally has not resolved the fundamental problems that caused more than 100 crypto projects to disappear in 2026. Many failed after running out of funds or experiencing security issues, while cryptocurrency exploits caused more than $1 billion in losses during the first half of 2026.

    These developments suggest that the rally has genuine support from a stronger macroeconomic backdrop. However, rising prices do not automatically validate every asset participating in the rally.

    Mognetti added:

    What deserves scepticism is the assumption that a rising market validates everything rising with it.

    The warning is significant because a similar level of market greed preceded Bitcoin’s correction of more than 30% in October 2025.

    This time, the total crypto market capitalization has risen by more than 22% in a week. However, the weekly relative strength index is extremely overbought, so caution remains warranted. Longer-term data, meanwhile, continues to indicate that the rally may have further room to run.

    Crypto sentiment has not reached peak greed

    Institutional demand remains a key difference in the current market cycle. Spot Bitcoin ETFs recorded more than $1 billion in inflows last week alongside a 21% $BTC rally. October’s inflows, however, exceeded $3 billion, suggesting there may still be scope for stronger institutional demand.

    The Coinbase Premium Index previously reached 0.18, reflecting strong accumulation by US investors. That signal is currently absent. As a result, despite short-term overbought conditions, sentiment around 75 may not yet represent peak greed or guarantee an imminent correction.

    These changes followed Bitcoin’s move back above $80,000. Nevertheless, some concerning market data suggest that the rally could continue while also highlighting the risks of interpreting rising prices as evidence of broad-based strength across the crypto industry.

  • Wall Street Altcoin Picks: Charles Schwab Backs Ethereum, Solana, XRP, and Hyperliquid

    Wall Street Altcoin Picks: Charles Schwab Backs Ethereum, Solana, XRP, and Hyperliquid

    Schwab Identifies Five Distinct Crypto Portfolio Roles

    Charles Schwab director of global equity research Adam Lynch recently outlined the firm’s approach to crypto allocation, separating five digital assets that it believes serve fundamentally different portfolio purposes: Bitcoin, Ethereum, Solana, $XRP and Hyperliquid.

    Schwab Says Crypto Assets Are Not the Same Trade

    Lynch described Bitcoin as the “classic” hedge against currency debasement, making it the asset investors may turn to when concerned about fiat currency devaluation. He said Ethereum offers greater functional utility than Bitcoin while still fitting within the broader debasement narrative.

    Lynch classified Solana, $XRP and Hyperliquid as higher-volatility, higher-risk allocations. He suggested pairing them with core positions in larger digital assets rather than using them as replacements.

    Goldman Sachs’ Solana ETF Exposure Draws Attention

    Goldman Sachs has become the largest disclosed holder of spot Solana ETFs, with $88 million in exposure, according to disclosure filings referenced in the discussion. Since not all institutional holders must disclose their positions, Wall Street’s actual Solana exposure could be significantly greater than the amount currently visible in public filings.

    Separately, Schwab confirmed that it is adding Solana, Avalanche and Chainlink to its crypto trading platform. The move expands the platform’s offering beyond the Bitcoin and Ethereum access it already provided.

    Grayscale Research has identified Bitcoin, Ethereum and Zcash as the assets most likely to benefit from what it calls the “debasement trade,” a trend linked to U.S. national debt exceeding $40 trillion and ongoing fiscal deficits.

    Solana’s Planned Token Supply Falls After Validator Vote

    In a separate development, Solana validators approved a proposal to double the network’s disinflation rate to 30%. Yes votes surpassed the 66.6% threshold during the final hour of voting.

    The change is expected to reduce planned SOL issuance by nearly 20 million tokens over the next six years, representing an estimated $1.4 billion in value. A reduction in newly issued tokens entering circulation is widely viewed as a structurally bullish development for Solana’s long-term valuation.

    Bitcoin Falls Below $77,000 as Fed Chair Warsh Signals Hawkish Stance

    The bullish crypto outlook met broader macroeconomic pressure on Friday, when Bitcoin dropped below $77,000 after Fed Chair Kevin Warsh signaled that a rate hike could be possible during his Jackson Hole keynote. Warsh has maintained a hawkish tone in each of his public appearances since taking the role.

    U.S. inflation has remained above the Federal Reserve’s 2% target for 65 consecutive months, according to the discussion. That persistent inflation continues to complicate the outlook for interest-rate cuts.

    What the Developments Mean for Crypto Investors

    Schwab’s differentiated crypto allocation strategy, Goldman Sachs’ growing Solana exposure, Solana’s reduced planned token issuance and a bipartisan regulatory bill receiving support from banks all point to expanding institutional infrastructure around digital assets.

    That infrastructure is developing even as short-term crypto prices respond to Federal Reserve commentary. Whether the structural momentum leads to sustained price strength could depend less on any single Fed speech and more on how quickly the CLARITY Act advances through Congress.

  • What Happens to Bitcoin, Ethereum, and XRP if the CLARITY Act Passes?

    What Happens to Bitcoin, Ethereum, and XRP if the CLARITY Act Passes?

    The CLARITY Act aims to resolve a question that has challenged U.S. regulators for more than a decade: when should a crypto token be treated as an investment, and when does it function more like a commodity such as gold?

    The answer would determine which regulator oversees a token, what its creators must disclose, and which rules crypto platforms must follow when listing the asset or holding it for customers.

    What Problem Is the CLARITY Act Designed to Solve?

    When a company or development team creates a token and sells it to finance a project, the transaction can resemble an investment. Early buyers may be betting on the team’s ability to build and promote the network.

    Years later, however, the same token could trade broadly across a decentralized network, with its value no longer primarily tied to the original team. At that stage, it may look more like a commodity than a security.

    U.S. law currently provides no clear rule for when a token crosses that line, leaving two federal regulators involved. The Securities and Exchange Commission oversees securities, while the Commodity Futures Trading Commission regulates futures markets and has more limited authority over direct commodity trading. Traditional assets generally fit clearly into one category. Crypto assets often do not.

    How the CLARITY Act Would Treat Bitcoin

    Bitcoin is already generally treated as a commodity, largely because it has no central issuer or company behind it. Under the current system, the CFTC’s authority over spot Bitcoin trading is mostly limited to policing fraud and market manipulation.

    The CLARITY Act would expand that authority, giving the CFTC broader power to directly regulate platforms where Bitcoin is bought and sold rather than intervening only after problems occur.

    How the Bill Would Treat Ethereum and $XRP

    Tokens such as Ethereum and $XRP occupy a more ambiguous position because of their fundraising histories and current decentralized use. The CLARITY Act attempts to draw the regulatory line based on a token’s function rather than solely on its origins.

    Fundraising activity would remain under SEC oversight, while later-stage trading in tokens deemed sufficiently decentralized could move to a new CFTC framework. The bill would not automatically classify every token as a commodity. Instead, it would create a path for tokens to move out of securities treatment when they no longer depend primarily on a central team.

    New Rules for Crypto Platforms and Projects

    Platforms operating under the proposed CFTC framework would have to register, keep customer assets separate from their own funds, and comply with requirements covering disclosures, recordkeeping and conflicts of interest.

    Projects raising money through token sales would need to disclose information about the people behind the project and explain how the underlying technology works. Insiders would also face new restrictions on how quickly they could sell their holdings.

    Why the CLARITY Act Has Been Difficult to Pass

    The central disagreement is not whether the crypto industry needs regulation, but what those rules should require and which agency should enforce them. Three disputes have shaped the bill’s progress.

    The first concerns rewards paid to stablecoin holders. Some platforms offer rewards for holding stablecoins, in a way that can resemble bank interest. Banks have argued that these programs could draw deposits away from the traditional banking system. Crypto companies have countered that restricting such rewards would protect banks from competition.

    After months of negotiations, lawmakers reached a compromise that would prohibit rewards paid solely for holding a stablecoin while allowing rewards connected to actually using one. Coinbase supported the revised agreement, and the Senate Banking Committee advanced the bill in May.

    The second dispute involves state regulatory authority. The CLARITY Act would replace certain state-level requirements with a single federal framework. Supporters say this would create consistency across the country, while critics warn that it could weaken states’ existing tools for investigating scams and holding crypto platforms accountable.

    The third issue concerns potential conflicts of interest among lawmakers and other federal officials. The latest draft would prohibit federal officials and their spouses from being paid to issue or sponsor digital assets while in office.

    Democrats are seeking stricter limits on lawmakers profiting from cryptocurrency. Republicans supporting the bill argue that the current draft already goes far enough. The legislation requires bipartisan support, and identical versions must pass both the House and Senate before it can reach the president’s desk.

    What Would Happen If CLARITY Passes?

    Crypto businesses would receive a clearer federal rulebook for registering and operating in the United States. Because the U.S. accounts for a significant share of global crypto capital and users, businesses and exchanges based outside the country could also adjust their practices to align with the new framework.

    That could extend the CLARITY Act’s influence beyond U.S. borders, particularly among companies serving American customers or seeking access to the U.S. market.

    What Happens If CLARITY Fails?

    Cryptocurrency would not become unregulated if the bill fails. Existing laws would continue to apply through regulators, courts and individual states.

    The main difference would be timing. Many of today’s legal boundaries are clarified only after a product launches, often after something has gone wrong. The CLARITY Act is designed to establish those boundaries in advance rather than after the fact.

    Source: cryptonews.net

  • Trump Family Crypto Schemes Cost Investors Over $4.7 Billion

    Trump Family Crypto Schemes Cost Investors Over $4.7 Billion

    Trump Family Crypto Ventures Cost Investors Over $4.7 Billion, Public Citizen Report Finds

    A new report from the watchdog group Public Citizen reveals that investors in cryptocurrency schemes launched by the Trump family have collectively lost more than $4.7 billion. The findings, published Thursday, arrive as President Donald Trump urges the Senate to pass crypto market structure legislation next month.

    Official Trump Memecoin Drives $3.2 Billion in Investor Losses

    The Official Trump (TRUMP) memecoin stands as the primary source of losses, accounting for $3.2 billion. The president unveiled the token three days before beginning his second term. According to Public Citizen, the token surged to a trading price above $73 within two days of its launch before collapsing. It currently trades below $2, as reported by Cointelegraph and Raw Story.

    Public Citizen emphasized that the $3.2 billion figure represents wealth transferred to early insiders rather than vanished funds. Data shows that 1% of wallets captured 80% of gains, while 65% of holders remain underwater, collectively nursing the $3.2 billion loss.

    President Trump did not lose money on the venture. He neither invested nor spent cash on his wallet, which is valued at $271 million. Additionally, he earned $635 million in licensing fees from the token last year, according to Raw Story.

    World Liberty Financial Tokens and NFT Trading Cards Add to Losses

    World Liberty Financial’s governance token—linked to the project founded by Eric Trump and Donald Trump Jr.—accounts for at least another $1 billion in total losses. The token peaked at $0.33 in September 2025 and now trades below $0.06. Public Citizen notes that private purchasers who bought in at $0.015 or $0.05 are up 15% to 283%, while public market buyers near the peak may be down 83%.

    The 2022 Trump NFT trading cards, initially sold at $99 each, saw overall value plummet from $12.3 million to $3 million, leaving holders nearly $9.3 million in losses. Trump collected $7.2 million in licensing fees and royalties from the cards.

    One asset avoided significant harm. Public Citizen says that buyers of World Liberty’s USD1 stablecoin haven’t suffered major losses.

    Trump’s Crypto Earnings Top $1.4 Billion Amid Investor Losses

    The report tallies the former president’s earnings across these projects:

    • $7.2 million from NFT trading cards
    • $600 million-plus from World Liberty token sales and equity position
    • $635 million from memecoin licensing fees
    • $197 million in capital contributions to World Liberty

    These figures align with Trump’s 2025 crypto-related earnings totaling $1.4 billion, excluding his equity positions in the companies.

    The White House did not immediately respond to a Cointelegraph request for comment. Spokesperson Anna Kelly previously stated there were no conflicts of interest regarding Trump’s crypto assets.

    Public Citizen Urges Ethics Provisions in CLARITY Act

    Zach Everson, research director for Public Citizen’s Trump Accountability Project and the report’s author, urged critics not to mock buyers. Trust me, I get the desire to sneer, he wrote in a Thursday post, before arguing that buyers got screwed over nevertheless.

    Public Citizen used the findings to renew its call for ethics provisions in the Digital Asset Market Clarity (CLARITY) Act, arguing that the president’s policy choices and personal portfolio cannot be separated and that any market-structure law should force a sitting president and his family to divest from the industry.

    Legislative Timing and Senate Hurdles

    The timing is deliberate. Trump met with crypto executives last week and called for a fair version of the CLARITY Act to pass once the Senate reconvenes. The bill faces a cloture vote on September 15 and requires at least 60 senators to advance.

  • Trump Crypto Ventures Leave Investors $4.7 Billion Underwater, Report Shows

    Trump Crypto Ventures Leave Investors $4.7 Billion Underwater, Report Shows

    Public Citizen estimates that investors in five Trump-linked cryptocurrency ventures have suffered at least $4.7 billion in combined losses through 2025, while former President Donald Trump personally generated approximately $1.4 billion in crypto-related income during the same period, according to the nonprofit watchdog’s analysis and the president’s financial disclosures.

    Breakdown of Estimated Investor Losses Across Trump Crypto Products

    The $4.7 billion figure aggregates both realized and unrealized losses across the following assets:

    • Official Trump memecoin ($TRUMP): $3.2 billion
    • World Liberty Financial governance token ($WLFI): At least $1 billion
    • Trump Media digital-asset treasury: $450 million
    • Trump Digital Trading Cards (NFTs): $9.3 million
    • World Liberty $USD1 stablecoin: No major loss assigned

    Public Citizen noted that $USD1 is designed to maintain a $1 peg and has not experienced a sustained de-pegging event. The organization emphasized that unrealized losses reflect current market values for holders who have not sold, meaning final totals could shift if prices recover or decline further.

    $TRUMP Memecoin: Wealth Transfer from Late Buyers to Early Insiders

    Launched on January 17, 2025 — three days before Trump returned to the White House — the $TRUMP token surged from under $1 to an all-time high of $73.43 before surrendering most of those gains. Citing blockchain intelligence firm Nansen, Public Citizen reported that approximately 1 million retail wallets (65% of those analyzed) were underwater by a combined $3.2 billion.

    Only about $400 million of that total represented realized losses through sales. The top 1% of profitable wallets captured roughly $2.7 billion (80% of all gains), while wallets that entered during the token’s first two days collected nearly 90% of profits.

    In July, crypto.news reported Nansen’s finding that nearly 989,000 wallets accumulated $3.81 billion in realized and paper losses through June 30. Public Citizen attributed the discrepancy to different wallet filters and measurement dates.

    Trump’s Estimated $1.4 Billion in 2025 Crypto Income

    While investors absorbed losses, Public Citizen calculated Trump’s proceeds from the ventures:

    • $635 million in licensing fees from $TRUMP (via CIC Digital LLC, a Trump-owned company that licensed its brand rather than investing directly)
    • $557 million from $WLFI token sales ($527 million in 2025 + ~$30 million in late 2024)
    • $65.6 million from an equity transaction tied to World Liberty Financial
    • $7.2 million+ from digital trading card licensing and royalties

    Two project-affiliated companies retained 80% of $TRUMP’s 1 billion-token supply, scheduled to unlock over three years, and also earn trading-fee revenue regardless of token price direction.

    Trump’s June 2026 annual financial disclosure placed his 2025 crypto-related income above $1 billion, with some calculations nearing $1.4 billion. The filing also listed a cold-wallet Bitcoin position worth over $50 million, a smaller Ethereum holding, and ~$1.8 million in ether staking rewards, along with ongoing exposure to $WLFI and $USD1 (often reported in value ranges per federal ethics rules).

    $WLFI Token: Peak Buyers Down Over 80%

    $WLFI hit a record $0.3313 on September 1, 2025, but Public Citizen valued it at $0.05744 at report time — an 83% decline for peak buyers.

    The largest estimated loss came from AI Financial Corporation (formerly ALT5 Sigma), a Nasdaq-listed firm that acquired 7.28 billion $WLFI tokens for ~$1.46 billion in August 2025. By June 2026, the position was valued at $421 million, implying a ~$1.04 billion paper loss.

    Among ~31,000 likely retail wallets purchasing $WLFI via Ethereum DEXs, Nansen found 25,000 (82%) underwater as of August 3, with $54 million in losses versus $24 million in gains. Centralized exchange activity was excluded due to lack of public account-level data, making the $1 billion estimate a minimum.

    Trump Media Shareholders Face $450 Million Treasury Loss

    Public Citizen attributed a $450 million loss to Trump Media shareholders tied to the company’s digital-asset treasury, noting investors bought shares in a publicly traded U.S. corporation that later allocated corporate funds to cryptocurrencies.

    White House Denies Ethics Concerns

    White House spokesperson Anna Kelly denied that the president’s business interests create an ethics problem. She stated that “neither Trump nor his family has engaged in conflicts of interest,” and the White House maintains that “the president does not participate in the management of his companies.”

    CLARITY Act and Renewed Push for Presidential Divestiture

    Following its loss estimate, Public Citizen called for the CLARITY Act to require a sitting president and immediate family members to divest from crypto ventures, arguing that federal digital-asset policy and the president’s private financial interests “cannot be separated.”

    The bill would:

    • Establish federal categories for digital assets
    • Divide oversight between the SEC and CFTC
    • Impose registration, custody, disclosure, and customer-asset rules for firms serving U.S. investors

    Ethics restrictions remain a key dispute in Senate negotiations, alongside DeFi rules and stablecoin yield provisions. Democratic lawmakers have pressed for limits on crypto holdings by elected officials; the White House rejects claims that Trump’s ventures influence policy.

    Senate Investigation Requests and Upcoming Procedural Vote

    Senators Elizabeth Warren and Richard Blumenthal separately asked the SEC in August to investigate whether the $TRUMP token facilitated fraud or improper enrichment after its price fell ~98% from peak. Their request did not establish securities fraud, and the SEC would first need to determine whether federal securities laws apply to the token.

    Trump met with crypto executives and federal regulators at the White House on August 19, urging lawmakers to approve a “fair version” of the legislation. Attendees included leaders from Coinbase, Robinhood, Kraken, Ripple, and other digital-asset firms.

    The Senate’s scheduled procedural vote is set for September 15 at 2:15 p.m. Eastern. Sixty senators must support cloture to begin debate; passage would still leave amendments, a final Senate vote, and reconciliation with the House-approved text.

  • Stablecoin Rewards Could Drain Billions From Regional Banks, Bank Executive Warns

    Stablecoin Rewards Could Drain Billions From Regional Banks, Bank Executive Warns

    A prominent South Dakota banking executive is cautioning federal lawmakers that the proposed stablecoin legislation could severely impact regional financial institutions. Nate Franzen, the head of agricultural finance at First Dakota National Bank, warns that unless the CLARITY Act currently under consideration in the U.S. Senate imposes strict limitations on stablecoin rewards, it could unintentionally siphon deposits away from community banks, directly weakening their capacity to support local economies.

    Understanding the CLARITY Act and Stablecoin Rewards

    The CLARITY Act is designed to establish a comprehensive federal regulatory framework for stablecoins—digital assets pegged directly to fiat currencies like the U.S. dollar. However, a major point of contention within the draft legislation is whether stablecoin issuers and digital asset platforms should be permitted to offer yield-bearing rewards or interest-like incentives to holders.

    In an opinion piece published by CoinDesk, Franzen argues that allowing these unregulated incentives could make stablecoins far more attractive to retail depositors than traditional bank accounts. Because these digital platforms do not operate under the same stringent regulatory frameworks and capital requirements as traditional banks, they can offer yields that regional institutions simply cannot match.

    To illustrate the scale of this threat, Franzen points to projections from the American Bankers Association (ABA). According to these estimates, out of the roughly $47 billion in total deposits held by regional banks across South Dakota, as much as $4.7 billion could migrate into stablecoins. Such a shift would strip local banks of up to $3.7 billion in lending capacity—a devastating prospect for a state economy heavily reliant on agricultural and small business credit.

    The Direct Threat to Local Agriculture and Small Businesses

    Regional and community banks serve as the financial backbone of rural America, providing essential credit to farmers, ranchers, and local entrepreneurs who are frequently underserved by major Wall Street institutions. If a significant portion of regional bank deposits relocates to digital stablecoin platforms, these community lenders will be forced to tighten credit standards and reduce loan volumes.

    Franzen emphasizes that his warnings are not an attempt to stifle financial innovation. Instead, he argues for a level playing field, ensuring that the introduction of novel financial technologies does not inadvertently dismantle the stability of the established community banking system that sustains local economies.

    Unregulated Yields and the Risk to Consumers

    Beyond the systemic risks to regional lending, the migration of deposits to stablecoins poses a significant threat to consumer safety. Traditional bank deposits are backed by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor, offering a guaranteed safety net. In contrast, stablecoins do not currently benefit from federal deposit insurance.

    This regulatory gap means consumers attracted by high stablecoin rewards may expose their savings to substantial capital risk without fully realizing the lack of institutional protection. Franzen is calling for robust regulatory definitions and oversight to ensure that any stablecoin-related rewards are transparent and that consumers are explicitly warned of the associated financial hazards.

    A Pivotal Moment for the U.S. Banking Sector

    The warnings issued by Franzen mirror a broader, nationwide debate concerning the convergence of digital assets and legacy finance. While some federal policymakers view stablecoins as a tool to modernize the payment ecosystem and lower transactional barriers, others remain highly skeptical of their systemic implications for traditional banking.

    The American Bankers Association has remained highly active in lobbying for a balanced regulatory approach that protects consumer funds while preserving the liquidity and lending power of community banks. The final provisions of the CLARITY Act will likely set a crucial precedent for digital asset regulation in the United States. If lawmakers opt to restrict stablecoin rewards, they may successfully insulate regional banks from deposit flight. Without these guardrails, the shift of capital away from community institutions could accelerate, leaving rural credit markets highly vulnerable.

    Frequently Asked Questions

    What is the CLARITY Act?

    The CLARITY Act is a piece of legislation under discussion in the U.S. Senate aimed at creating a federal regulatory structure for stablecoins, specifically addressing issuance guidelines, reserve requirements, and consumer protections.

    How do stablecoin rewards threaten regional banks?

    If stablecoin issuers are permitted to offer interest-like rewards, they could draw yield-seeking depositors away from community and regional banks. This deposit flight would reduce the capital these banks have available to fund local loans.

    Are stablecoins protected by FDIC insurance?

    No, stablecoins do not carry FDIC insurance. Unlike traditional bank deposits, which are federally protected up to $250,000, stablecoin holdings are subject to loss if the issuer or platform encounters financial distress.