The Stablecoin Yield Fight Is Far From Over—Here’s What Comes Next

The CLARITY Act has stalled, but the industry is already separating payment stablecoins from the loans, securities and funds that generate returns. Stablecoin yield has not gone away, much to the chagrin of many on Wall Street. The Senate failed to advance the CLARITY Act this month, but it was a close call. It received 50 votes in favor and 49 against.

It needed 60 to invoke cloture. Sen. Thom Tillis (R-NC) switched his vote to "no" procedurally so the measure could potentially be reconsidered but with Congress heading toward the midterm recess, the bill is iced. The CLARITY Act would have added new restrictions on stablecoin "rewards" — basically yield.

Stablecoin yield and its possible effects on bank deposits remains one of the central fights in CLARITY. The final Senate draft even added Treasury authority aimed at responding to stablecoin-related deposit flight. Traditional finance would probably like this settled sooner rather than later. The hope is that stablecoins are not competing with bank CDs and traditional lending.

That is where the market is going at the moment, and many in the banking industry are trying to figure out the new terrain. TradFi Worried About Stablecoin Competition Jane Fraser, Citigroup CEO, said on August 13 that stablecoin "rewards could have a detrimental impact" on traditional bank deposits, reducing banks’ ability to provide lending and credit. Umar Farooq, global co-head of JPMorgan Payments, and Peter Muriungi, CEO of Digital Assets and Blockchain Solutions at JPMorgan, said payments innovation becomes dangerous when it drifts into "shadow banking" through yield-like incentives without bank-style capital, liquidity, consumer protection and supervision..

The GENIUS Act — now law — already prohibits a stablecoin issuer from paying interest or yield. But it does not explicitly shut down every arrangement through which an exchange, fintech, affiliate or third party can offer an interest-bearing product involving stablecoins. Even a White House analysis this year identified that distinction. CLARITY was attempting to go a step further.

S. customers passive, deposit-like yield on their payment-stablecoin balances. Market players are figuring out ways to keep that legal. S.

based CEO and Co-Founder of OpenTrade. Sutter co-founded OpenTrade in January 2023 after working at Centre, a joint venture created by Circle (NYSE: CRCL ) and Coinbase (NASDAQ: COIN ) that governed the standards around USDC. "Our clients lend stablecoins…and earn interest on that loan, which is backed by a portfolio of high-quality financial assets," Sutter said. "There’s a borrower, a loan agreement and collateral behind it.

" To avoid butting heads with the likes of Jane Fraser from Citigroup, Sutton’s offer is to use dollar stablecoins to loan to a special purpose vehicle who then uses that loan as collateral and earns interest that way, to keep it simple. The Stablecoin Yield Makers Maple Finance is probably the cleanest comparison to OpenTrade. Users can deposit USDC and receive a yield-bearing asset called syrupUSDC. Its current yield is around 5%, close to long duration Treasurys and some corporate bonds.

The yield is generated by actual institutional lending rather than simply by holding USDC. Maple says the underlying loans are secured and collateralized, like OpenTrade In Maple’s September memo, CEO and Co-founder Sidney Powell said CLARITY failed Senate vote shifts attention toward SEC and CFTC rulemaking. " Maple is basically saying what OpenTrade is saying: their stablecoin lending model already exists inside current financial law. CLARITY would clarify the larger crypto perimeter rather than forcefully rewrite their business model.

Ondo Finance (CRYPTO: ONDO) is another player. Its USDY stablecoin is legally a tokenized debt instrument, not a payment stablecoin. USDY is backed by short-term Treasuries and bank deposits and was designed using a bankruptcy-remote special-purpose vehicle, which is conceptually similar to the structure at OpenTrade. 6% annually.

And Ondo’s institutional OUSG stablecoin goes even further: investors can subscribe using USDC, which is converted into exposure to tokenized Treasury assets. If one was to make a chart of how this all works in text — it would look like USDC goes into stablecoins which buy Treasuries which generate yield for those holding the Ondo product. Nathan Allman, the Ondo founder who died in May unsuspectedly, argued in a 2025 Wolf of All Streets podcast that a stablecoin-like product paying yield could exist under securities law rather than payment-stablecoin law. Here is another stablecoin-meets-traditional finance example.

S. government securities. Qualified investors can subscribe and redeem using either dollars or USDC. The GENIUS Act gave traditional financial institutions sufficient statutory assurance to begin building stablecoin businesses at scale with crypto native partners.

CLARITY’s failure, to date, has not changed that trajectory. For Sutter, people who are focusing on whether the stablecoin pays yield are missing the bigger opportunity. "Stablecoins are very good payment instruments. Investment products are a different thing," he said.

"Trying to do both of those things with one token creates unnecessary complications. It makes much more sense to keep the payment layer simple and build savings and investment products on top of it. " Cover art created by the author using Canva Disclaimer: This article is from an unpaid external contributor. It does not represent ’s reporting and has not been edited for content or accuracy.