Stablecoin Regulation Faces Banking Sector Pushback Amid Market Expansion

• A coalition of 134 banking leaders is urging the U.S. Senate to strengthen Section 10404 of the CLARITY Act, warning that divert hundreds of billions from traditional bank deposits.
• Regulated stablecoin USA₮, backed by Tether and issued by Anchorage Digital Bank, has launched on the Celo blockchain, enabling users to pay transaction fees directly in the asset.
• Stablecoin Development Corporation, formerly NovaBay Pharmaceuticals, has pivoted to crypto staking after a $134 million investment round, reporting significant non-cash gains in its first quarter.

A group of 134 banking association officers and bank leaders from across the United States is urging the Senate to revise the CLARITY Act before final passage . The banking executives are warning that stablecoin incentives could challenge the role of bank deposits in the broader financial system . They have specifically targeted Section 10404 of the crypto legislation, which establishes restrictions on paying interest or yield on payment stablecoins . The signatories argue that companies might bypass this prohibition through rewards, incentives, or other arrangements that create similar economic benefits for holding stablecoins .

The bank leaders stated that if stablecoin products are permitted to attract balances through interest-like rewards, the local funding base supporting lending could be weakened by hundreds of billions . They emphasized that deposits provide the foundation for lending to families, small businesses, farmers, and local employers . The group urged the Senate to incorporate targeted changes recommended by state bankers associations to preserve clear boundaries between payment stablecoins and deposit-like products . This debate highlights a broader disagreement over the future role of stablecoins in financial markets .

Bankers argue that payment stablecoins should remain focused on transactions rather than become products designed to attract long-term holdings . They contend that stablecoin products designed around holding incentives could alter funding flows that currently support mortgages, business expansion, and community investment . The proposed revisions would preserve stablecoin payment innovation while limiting structures that bankers believe could replicate deposit-like incentives without the same regulatory framework . The Senate’s final language on stablecoins will define how payment-focused digital assets operate within the U.S. financial system .

In a parallel development, USA₮ has officially launched on the Celo blockchain, marking the first time the regulated stablecoin extends beyond Ethereum . The stablecoin is issued by Anchorage Digital Bank and backed by Tether, representing a shift toward compliant digital dollar infrastructure . The integration allows users to pay transaction fees directly in USA₮ through the network’s built-in fee abstraction system . This feature enables users to transact without first acquiring CELO tokens, reflecting a growing use of digital dollars for everyday blockchain transactions .

Stablecoins already account for more than half of gas fee payments on the Celo network . The launch expands Tether’s ecosystem, which already supports native USD₮ and XAUt0 . Marek Olszewski, CEO of Celo Core Co., noted that the integration brings another regulated payment asset to users relying on stablecoins . Bo Hines, CEO of Tether US, added that the decision was driven by the network’s growing role in stablecoin payments .

Support for the stablecoin is expanding across Celo-based applications, with Valora already integrating USA₮ and MiniPay expected to follow . Integrations with decentralized finance protocols, including Morpho, Squid, and Uniswap, are planned to enable trading and lending . USA₮ is structured to align with standards established under the GENIUS Act, reflecting a broader shift toward regulated stablecoins .

Meanwhile, Stablecoin Development Corporation has executed a significant corporate restructuring, transitioning from its previous identity as NovaBay Pharmaceuticals to a focus on the cryptocurrency sector . The company began trading on the NYSE American under the new ticker symbol SDEV . The strategic pivot was funded by a $134 million investment round involving key industry players, including Tether Investments and Framework Ventures . These funds were utilized to acquire 2.06 billion SKY tokens .

The company reported $22.3 million in operating income and $552.4 million in GAAP net income for the first quarter of 2026 (). The substantial net income was driven primarily by significant non-cash gains related to warrants . This discrepancy highlights the impact of derivative instruments on the company’s reported profitability . The transition involved extensive shareholder approvals to facilitate a new business model centered on staking rewards.

Connor Fitzgerald, who led Stripe's stablecoin card development following its acquisition of Bridge, has departed the platform. Fitzgerald was responsible for establishing relationships with sponsor banks and payment networks across more than 100 international markets . His departure follows significant product releases and regulatory clearances, though he has not disclosed his next employer .

Bridge’s acquisition of Markets in Crypto-Assets compliance and Electronic Money Institution licensing in Luxembourg allows compliant operations across all 27 EU member nations . The infrastructure supports cross-border euro banking and allows corporate clients to transfer capital internationally using stablecoins . Visa has expanded its collaboration with Bridge to facilitate stablecoin-backed payment card initiatives .

What is the impact of stablecoin yield incentives on traditional banking? The banking sector argues that stablecoin yield incentives could divert hundreds of billions from traditional bank deposits . This diversion would weaken the local funding base that supports lending to families and small businesses . The coalition urges the Senate to strengthen Section 10404 of the CLARITY Act to prevent companies from bypassing prohibitions on interest-like rewards . Clear rules would allow payment stablecoins to develop while preserving funding channels for community lending .

How is regulated stablecoin infrastructure expanding in decentralized finance? USA₮ has launched on the Celo blockchain, enabling users to pay transaction fees directly in the stablecoin . This integration supports the network’s fee abstraction system, allowing transactions without native CELO tokens . The launch reflects a broader shift toward regulated stablecoins as banks and fintech firms compete to offer compliant digital dollar infrastructure .

What are the financial implications of corporate pivots to crypto staking? Stablecoin Development Corporation reported $552.4 million in GAAP net income for Q1 2026, driven by non-cash warrant gains . The company holds 2.06 billion SKY tokens following a $134 million investment round . This financial structure highlights the complexity of corporate transitions from traditional sectors to crypto asset holdings .