The CLARITY Act is emerging as a focal point in a growing conflict between U.S. banks and crypto platforms over how dollar-denominated value is distributed and monetized. While framed as a market-structure bill, the real battle centers on stablecoin rewards and whether they function as interest by another name.

Stablecoin rewards allow users to earn returns close to short-term Treasury yields simply by holding dollar-pegged tokens on crypto platforms. This directly challenges banks, whose retail deposit rates remain far below government benchmarks. As a result, banks fear deposit outflows, higher funding costs, and the loss of customer relationships tied to checking and savings accounts.

Lawmakers are now attempting to draw a legal line between prohibited “hold-to-earn” interest and permitted loyalty or activity-based rewards. While issuers may be restricted from paying interest, platforms can still offer rewards that feel economically similar, shifting the competitive pressure to the distribution layer rather than the token itself.

With DeFi rules largely left unresolved and stablecoin rewards continuing to gain traction, the CLARITY debate highlights a deeper structural question: whether stablecoins will remain simple “digital cash” or evolve into a full-fledged alternative to bank deposits in the U.S. financial system.