TD Cowen Says Stablecoin Interest Fight Could Delay CLARITY Act

TD Cowen said disagreement over whether stablecoins should pay interest remains a major obstacle to passing the CLARITY Act, US legislation aimed at setting market-structure rules for digital assets.

The Block reported on May 5 that Jaret Seiberg, a managing director at TD Cowen, wrote in a report that there is no clear middle ground that would satisfy both banks and the crypto industry. Some crypto companies want to keep offering stablecoin rewards to preserve user liquidity, while banks strongly oppose the practice because they see it as a de facto substitute for deposits.

Banks have strengthened their negotiating position by coalescing around a single stance, Seiberg wrote. That makes it difficult to say the crypto industry will have the upper hand in the debate.

The legislative calendar is also tight. For the Senate to vote by late July, the bill would need to clear the Senate Banking Committee by late June. Prolonged fighting, however, could push back that timeline. Seiberg said the dispute could delay markup of the bill until June.

He also cited regulatory gaps and political issues as additional hurdles. Staffing shortages at the Commodity Futures Trading Commission, conflict-of-interest concerns in Washington and geopolitical risks are collectively weighing on the bill's path through Congress.

Seiberg has previously expressed skepticism that the bill will pass this year. If the legislation slips into the midterm election cycle, momentum could weaken sharply, he added. Depending on how events unfold, a prolonged delay in deliberations cannot be ruled out.