The CLARITY Act and Stablecoin Rewards: A Tipping Point for U.S. Crypto Dominance

The U.S. crypto market stands at a crossroads. The CLARITY Act of 2025, a landmark legislative effort to clarify regulatory guardrails for digital assets, has ignited a fierce debate over stablecoin rewards-a mechanism central to user adoption and platform revenue. As the Senate prepares to finalize the bill in 2026, the outcome could redefine the competitive landscape for crypto firms like Coinbase and reshape the trajectory of U.S. crypto dominance.

The CLARITY Act: A New Framework for Digital Assets

The CLARITY Act seeks to resolve jurisdictional conflicts between the SEC and CFTC by categorizing digital assets into three tiers: digital commodities, investment contracts, and permitted payment stablecoins. Permitted payment stablecoins are explicitly excluded from being treated as bank deposits, a provision backed by credit unions and banks concerned about the risks of stablecoin yields. This exclusion aims to prevent crypto platforms from siphoning deposits away from traditional institutions, which could destabilize local lending ecosystems.

The act also mandates registration and compliance standards for exchanges and brokers under the CFTC, signaling a shift toward a more structured market. Proponents argue this clarity will attract institutional capital and foster innovation, while critics warn it could stifle the very growth it aims to encourage.

Stablecoin Rewards: The $6–$47 Billion Question

Stablecoin rewards have become a linchpin of user engagement and revenue for crypto platforms. Coinbase, for instance, generated $1.3 billion in stablecoin-related revenue in 2025, largely from its USDC rewards program, which offered 3.5% incentives to Coinbase One customers. The broader rewards pool- estimated at $6–$47 billion-relies on interest from Treasury securities backing stablecoins, creating a lucrative ecosystem for exchanges.

However, the CLARITY Act's proposed restrictions on yield mechanisms threaten to upend this model. Banking groups, including the American Bankers Association, argue that stablecoin rewards create unfair competition by mimicking traditional banking services without the same regulatory safeguards. They advocate for extending the GENIUS Act's ban on direct stablecoin yields to affiliated platforms, effectively eliminating third-party rewards.

Coinbase's Stance: Innovation vs. Regulation

Coinbase's position has evolved dramatically. Initially a supporter of the CLARITY Act, CEO Brian Armstrong recently announced the company would withdraw backing due to concerns over provisions targeting tokenized equities, DeFi, and stablecoin incentives. The company's stablecoin revenue- $355 million in Q3 2025-highlights the economic stakes. If the Senate Banking Committee enacts restrictions, Coinbase may lose a critical revenue stream and face pressure to innovate alternative reward mechanisms, such as tokenized assets or fee-based models.

The political calculus is complex. Coinbase, a major Trump administration donor and partner with Circle, has threatened to withdraw support for the bill if it imposes broad limits on stablecoin rewards. This standoff underscores the tension between regulatory caution and the need to maintain U.S. competitiveness in a global market where rivals like China are already offering interest on digital currencies.

Market Implications and the Path Forward

The CLARITY Act's final form will have profound implications. A restrictive approach could protect traditional banking interests but risk ceding ground to international competitors. Conversely, a more permissive framework might accelerate U.S. crypto adoption but expose systemic risks. Analysts estimate the bill's passage probability at less than 70%, reflecting deepening partisan divides.

For investors, the key variables are:
1. Regulatory clarity: A balanced framework could attract institutional capital and spur innovation.
2. Market structure: Restrictions on stablecoin rewards may drive users to alternative platforms or jurisdictions.
3. Global competition: If the U.S. lags in regulatory flexibility, China and others could dominate the digital asset space.

Conclusion: A Tipping Point for U.S. Crypto

The CLARITY Act represents more than a regulatory overhaul-it is a test of the U.S.'s ability to balance innovation with stability. For Coinbase and other crypto firms, the stakes are existential. For the broader market, the outcome will determine whether the U.S. remains a leader in digital assets or cedes its edge to more agile competitors. As 2026 unfolds, the Senate's decisions will shape not just the crypto industry but the future of global financial systems.