CLARITY Act regulates Bitcoin yields: The Bank Deposit Exodus

Senator Moreno's legislative timeline signals a strategic pivot for US crypto policy and the future of BTC.

CLARITY Act Tremors: Why Bitcoin Yields & Stablecoin Regulations Are Redrawing the Crypto Map Today

The cryptocurrency market is buzzing with a palpable tension. A major legislative push, the US CLARITY Act, is barreling through Congress, with whispers of passage as early as April. This isn't just another piece of paper; it’s a seismic event designed to bring "clarity" to crypto, particularly focusing on Bitcoin yields and stablecoin regulation. But as any seasoned investor knows, clarity often comes with a price tag, especially when it threatens the old guard.

🌐 Senator Bernie Moreno’s recent comments about the bill’s rapid timeline have sent ripples across financial markets and legislative chambers. This isn't just about defining digital assets; it's about who gets to control the future of finance, and what that means for your portfolio.

Prediction markets reflect the volatile reality of the SEC tightening its grip on emerging stablecoin yields.

📌 The Regulatory Gauntlet How We Got Here

For years, the crypto industry has operated in a regulatory grey zone, a wild west that fostered immense innovation but also led to spectacular blow-ups. Think back to the implosion of Terra/Luna in 2022 or the systemic fraud exposed with FTX in 2022. These events, fueled by opaque practices and insufficient oversight, screamed for legislative intervention.

🏛️ The CLARITY Act emerges from this tumultuous history. It aims to formalize rules around digital asset offerings, defining what constitutes a security and who regulates it. Critically, it seeks to ban interest-bearing stablecoins and cement the SEC as the primary regulator for much of the crypto landscape.

This isn't just about protecting retail investors, although that's the public-facing narrative. It's about institutional control and the systematic de-risking of traditional finance's periphery. Banks, ever protective of their multi-trillion-dollar deposit base, see yield-generating crypto products as an existential threat.

📌 The High Stakes Stablecoin Yields and Bank Deposits

🏛️ At the heart of the CLARITY Act battle lies stablecoin yields. Crypto firms, like Coinbase, have championed these products, arguing they are a natural evolution of decentralized finance, meeting genuine market demand for efficient capital utilization.

Coinbase faces a structural blockade as the SEC asserts total dominance over yield-bearing digital assets.

Traditional banks, however, are seeing red. The idea of retail and institutional capital flowing easily into stablecoins offering attractive yields, effectively bypassing traditional banking rails, gives them nightmares. It’s a direct challenge to their long-standing business model, built on low-cost deposits that they can then lend out at higher rates.

The tussle for regulatory supremacy is also fierce. Coinbase CEO Brian Armstrong, while now expressing "more hopeful" talks, initially pulled his group’s backing precisely because the bill would hand the SEC an overarching mandate and stifle interest-bearing stablecoins. Let's be clear: this isn't about fostering innovation; it's about preserving established power structures.

Even the White House got involved when a major exchange initially balked, signaling "surprise" and pushing for a quicker resolution. This demonstrates just how high the stakes are for Washington, and how deeply intertwined crypto has become with the broader financial stability agenda. Prediction markets like Polymarket showed immediate, dramatic shifts in passage odds, a clear indicator of the market's sensitivity to these signals.

“Hopefully by April,” Senator Moreno remarked, highlighting the political urgency to finalize this bill.

📌 Stakeholder Showdown A Historical Echo

Stakeholder	Position/Key Detail
US Lawmakers (Senator Moreno)	🎯 Pushing for swift passage of CLARITY Act, targeting April.
Coinbase (Brian Armstrong)	🐻 Initially opposed due to ban on interest-bearing stablecoins and SEC oversight; now "more hopeful" after talks.
Traditional Banks	Worry easy crypto yields will pull deposits, weakening their model; seek stricter rules or clear guardrails.
White House	📈 Signaled surprise at initial industry pullback, urged quicker agreement on the bill.

🐻 This whole spectacle feels eerily familiar. The closest historical parallel I see is the 2021 President's Working Group on Financial Markets (PWG) report on stablecoins. That report, published in late 2021, explicitly called for stablecoin issuers to be regulated as banks. The outcome back then was a chilling effect on nascent stablecoin projects, forcing many to consider arduous banking charters or re-evaluate their models.

Traditional banks view the migration of capital to digital tokens as a systemic threat to BTC liquidity.

In my view, the PWG report was a calculated first strike by traditional finance and regulators to contain the perceived threat of decentralized money. The lesson learned? When mainstream finance sees a direct competitor, it will leverage regulatory frameworks to either co-opt or crush it.

Today's CLARITY Act is different in its legislative directness, but identical in its underlying motivation: to bring the disruptive potential of stablecoins and crypto yields under the tight control of existing financial gatekeepers. The 2021 PWG report was a warning shot; the CLARITY Act is a direct hit, aiming to carve out regulatory territory and neuter features deemed too competitive with traditional banking.

🚩 The DealBreakers Politics Banks and Regulatory Turf Wars

Despite the current momentum, several factors could still derail the CLARITY Act. President Trump's strong pro-crypto messaging helps rally allies, but tying the bill too closely to one political brand could fracture crucial bipartisan support needed for such significant legislation.

➕ Furthermore, the financial industry itself isn’t a monolith. While some large institutions might desire stricter rules to level the playing field against nimble crypto competitors, others prefer limited, clear guardrails. They want enough oversight to legitimize the space for their own eventual entry, but not so much that it stifles the innovation they hope to eventually acquire or replicate.

👮 The biggest hurdle remains the perennial turf war between regulatory bodies. The SEC pushing to be the lead regulator is meeting resistance from those who argue the CFTC is better suited for certain digital assets. These squabbles, often playing out behind closed doors, are where complex financial bills tend to get bogged down. Even with leadership pushing hard, these deep-seated conflicts make swift, decisive passage far from guaranteed.

The White House demands swift alignment to maintain control over the evolving BTC financial ecosystem.

🔑 Key Takeaways

• The CLARITY Act aims to regulate Bitcoin yields and stablecoins, potentially banning interest-bearing stablecoins and establishing the SEC as the primary crypto regulator.
• This legislative push is a direct response to past crypto market failures and represents a power struggle between traditional banking and the crypto industry over capital flows and financial control.
• Historical parallels, like the 2021 PWG report, show a consistent pattern of traditional finance seeking to contain or control crypto innovation through regulatory means.
• Passage is not guaranteed, facing hurdles from partisan politics, internal divisions within the banking sector, and inter-agency regulatory battles.
• Investors should brace for increased market volatility and a potential reshuffling of the stablecoin landscape if the bill passes as currently envisioned.

🔮 Thoughts & Predictions

The parallels to the 2021 PWG stablecoin report are stark, indicating that traditional financial institutions, with regulatory backing, are tightening their grip. This CLARITY Act, if passed with its current provisions, is not just about bringing order; it's about re-routing value creation away from decentralized protocols and into regulated, centralized entities. Expect significant short-term price volatility, especially for stablecoin-related assets and DeFi protocols reliant on yield-bearing mechanisms.

➕ In the medium term, we could see a bifurcation: highly regulated, KYC-compliant stablecoins gaining institutional adoption, while truly decentralized, yield-generating stablecoins face an uphill battle or are forced underground for US participants. The market cap for regulated stablecoins could see a surge, but at the expense of innovation. This move effectively funnels institutional capital into a compliant, less competitive sandbox, protecting legacy players.

The long-term impact will be a recalibration of the crypto landscape. While "clarity" is often touted as a positive, this particular brand of clarity likely means less freedom for retail investors and smaller protocols to innovate on yield. The true winners will be the incumbent financial giants who can absorb compliance costs and the politically connected crypto firms that can pivot into regulated offerings. It’s a consolidation play, plain and simple.

🎯 Investor Action Tips

• Monitor Regulatory News Closely: Track congressional progress and any amendments to the CLARITY Act; specific language changes can dramatically alter market impact.
• Evaluate Stablecoin Exposure: Re-assess your portfolio's reliance on interest-bearing stablecoins or DeFi protocols generating yield from them. Consider shifting to non-yield stablecoins or exploring offshore options if permissible.
• Research Compliant Projects: Look for projects that are proactively building within anticipated regulatory frameworks or are strategically positioned to thrive under a more centralized oversight model.
• Diversify Beyond US-Centric Assets: Consider diversifying into protocols and assets with strong international user bases or those focusing on jurisdictions with more favorable regulatory environments.

📘 Glossary for Serious Investors

Yield-Bearing Stablecoins: Stablecoins that offer a return or interest to holders, often through lending protocols or other DeFi mechanisms, designed to be pegged to a fiat currency.

Deposit Exodus: A sudden and significant withdrawal of funds from traditional financial institutions (banks), often driven by perceived better returns or opportunities elsewhere, such as in crypto.

SEC (Securities and Exchange Commission): A U.S. government agency responsible for protecting investors, maintaining fair and orderly functioning of securities markets, and facilitating capital formation. In crypto, it asserts jurisdiction over assets deemed "securities."

🧭 Context of the Day

The CLARITY Act signals a defining moment where traditional finance overtly attempts to control crypto's disruptive yield potential, forcing investors to navigate a new, more centralized landscape.

💬 Investment Wisdom

"Regulatory clarity in finance is often a euphemism for the institutionalization of a monopoly."
— Marcus Thorne

Crypto Market Pulse

February 20, 2026, 05:10 UTC

Total Market Cap

$2.38 T ▲ 0.17% (24h)

Bitcoin Dominance (BTC)

56.51%

Ethereum Dominance (ETH)

9.84%

Total 24h Volume

$86.43 B

Data from CoinGecko

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