JPMorgan's Dimon leads bank fight on stablecoin yield as Clarity Act teeters

The battle over whether crypto platforms can pay interest on stablecoins is nearing a make-or-break moment in Washington, and the banking industry is throwing its full weight behind stopping it.

The Senate's Digital Asset Market Clarity Act, which already faced long odds, has been further weakened by a dispute over stablecoin yield that banks have refused to drop. JPMorgan Chase & Co. CEO Jamie Dimon has become the public face of that fight, arguing that crypto firms would get an unfair advantage if they can reward stablecoin holders in ways that resemble bank deposit interest.

"It should be fair and equal, period," Dimon said in a June Fox Business interview, calling the Clarity Act's protections against money laundering and illicit finance insufficient. "The banks will not accept it that way. We'll fight it. If we lose, we lose."

The banks' core argument is straightforward: if customers can earn 3.5% or more by holding stablecoins on exchanges like Coinbase, Kraken or Gemini, they will pull money out of low-yield bank deposits. That would shrink the pool of money banks use to make loans, the industry says.

A standard JPMorgan Chase savings account pays 0.01%. Twenty years ago, that same account paid more than 4%. Even the bank's 4-month certificates of deposit, which require locking up funds, yield about 3.25% – below the current 3.4% inflation rate.

The Clarity Act's current text tries to split the difference. It would ban crypto platforms from rewarding stablecoin holders just for holding them, but would allow rewards tied to using the tokens – similar to credit-card incentives. That compromise, worked out between a Republican and a Democratic senator, has not satisfied the banks.

The American Bankers Association wrote on its website that the key question is how regulators write the "anti-evasion language, particularly as it relates to indirect yield such as distribution-fee arrangements." The ABA warned that "concern that these rules will not go far enough is exactly why ABA is calling on Congress to tighten the language around stablecoin rewards in the Clarity Act."

Crypto lobbyists insist the issue is settled. "Simply put, this matter has already been dealt with," said Rashan Colbert, director of U.S. policy at the Crypto Council for Innovation.

But several Republican senators have signaled they may oppose the bill without more bank-friendly changes. "My state right now – agriculture folks, local community people – are very, very worried about the effect on community banks," Senator Josh Hawley, a Missouri Republican, told Politico. "They are blowing me up over it."

The Clarity Act needs 60 votes to pass the Senate. At this point, it may struggle to win a simple majority.

If the bill fails, the banks would be stuck with the status quo: the GENIUS Act, which became law last year. The GENIUS Act bans stablecoin issuers from offering yield to holders, but is less clear on what exchanges can do. The final rules, when written, will determine how much room exists for reward programs tied to distribution fees or other structures.

Some crypto advocates are urging the industry to compromise. "There are some battles worth fighting for innovation, and there are some battles that are better ceded to build a durable regulatory framework," said Adrian Wall, managing director of the Digital Sovereignty Alliance, a recently formed crypto advocacy group. "If resolving the yield question is what it takes to bring the banking sector into a broader consensus on market structure, that is a trade worth making."

The Clarity Act has three weeks of Senate action left before the midterm elections. The stablecoin yield question will be tested one way or another by then.

JPMorgan Chase & Co. (JPM) has an AlphaScala Score of 52 out of 100, rated Mixed. The stock trades at $362.84, down 0.07% on the day.