If crypto rewards survive CLARITY Act banks are likely to rapidly build their own branded digital dollars

The current stablecoin regulatory debate in Washington has shifted from whether dollar-linked tokens should exist to whether they should be treated as deposits, especially if consumers earn interest-like rewards for holding them. Banks view stablecoins as competition because their reserves shift "cash" balances away from traditional, cheap bank deposits toward sovereign funding via short-term Treasuries, threatening their deposit franchise. This conflict is entangled with the implementation of the GENIUS Act and the ongoing market-structure discussions grouped under CLARITY. Banks advocate for a broad prohibition on stablecoin yield offered by any entity to prevent deposit flight, while crypto firms argue rewards are necessary for competition. The impasse presents three potential paths: a no-yield clampdown favoring stablecoins as pure settlement tools; a compromise allowing activity-based rewards but restricting duration-based interest, likely leading to yield migrating to wrappers; or the status quo persisting, normalizing stablecoin "cash accounts" and risking a sharper regulatory backlash later. If crypto rewards survive, banks are expected to rapidly develop their own branded digital dollars to compete for consumer balances.

(Source：CryptoSlate)