The Stablecoin Rewards Stalemate: A Last-Ditch Effort to Protect Central Bank Hegemony?

The Stablecoin Rewards Stalemate: A Last-Ditch Effort to Protect Central Bank Hegemony?

The battle over stablecoin rewards is more than just a policy debate; it's a fight for the future of money. As the CLARITY Act stalls in the Senate, a deeper question emerges: is this about financial stability, or protecting central bank hegemony from the threat of obsolescence?

⚖️ THE REGULATORY FAULT LINE: SECTION 404

The controversy centres on Section 404 of the CLARITY Act¹, a provision designed to close a perceived loophole in the 2025 GENIUS Act². Whilst the GENIUS Act prohibits stablecoin issuers from paying interest, it left the door open for third-party exchanges to offer yield. Section 404 would slam that door shut.

🏛️ THE CENTRAL BANK HEGEMONY THEORY

Some experts argue this isn't about protecting consumers, but about protecting the existing financial architecture. The Columbia Economic Review calls the yield prohibition a "deliberate move to prevent stablecoins from competing with bank deposits" and a way to reinforce US dollar hegemony by creating a "captive-buyer mechanism" for U.S. Treasury securities⁵.

💡 THE REGULATORY ARBITRAGE PREDICTION

Even if Section 404 passes, the battle is far from over. History shows that the digital asset market is adept at regulatory arbitrage. Experts predict that third-party users will simply remodel their business structures to avoid any unhelpful regulatory language, a view supported by the fact that some firms are already using subsidiary models to offer rewards⁶.

🔮 PREDICTION: THE PATH FORWARD

A compromise is inevitable, likely a cap on rewards or stricter licensing. But the core tension remains. The real question isn't if stablecoin yield will exist, but how it will be structured and who will capture the value.

References

¹ CLARITY Act, Section 404 (Jan 12, 2026 draft) ² GENIUS Act (July 18, 2025) ³ American Bankers Association, Letter to Senate Banking Committee (Jan 5, 2026) ⁴ Blockchain Association, Letter to Congress (Jan 2026) ⁵ Columbia Economic Review, "Digitalizing Dominance" (Jan 13, 2026) ⁶ SSRN, "Evidence of Regulatory Arbitrage in Digital Asset Markets" (Jan 6, 2026) ⁷ American Banker, "Banks' battle against stablecoin yield is already a lost cause" (Feb 2, 2026)