CLARITY Act Draft Sparks Boycott Calls: Experts Warn of Banking Manipulation Risks
Legislation meant to bring transparency might just give traditional banks more power to control the narrative—and your assets.
Why Experts Are Sounding the Alarm
A new regulatory draft is on the table, and it's not sitting well with those who value financial sovereignty. The so-called CLARITY Act, pitched as a framework for clearer rules, is drawing fierce criticism from industry veterans. They see loopholes wide enough for a bank's armored truck to drive through—loopholes that could let legacy institutions manipulate markets under the guise of compliance.
The Hidden Levers of Control
Forget decentralization; this draft could centralize power back into the hands of the very intermediaries crypto sought to bypass. Provisions buried in the legal jargon potentially grant banks disproportionate oversight on transaction flows and asset classifications. It's the old guard getting a new toolkit, and they're not afraid to use it to protect their turf—and their profit margins. After all, what's a little market manipulation between friends with banking licenses?
The Pushback Gains Momentum
Calls for a boycott aren't just noise. They're a coordinated response from foundations, developers, and exchanges who recognize a trap when they see one. The movement argues that engaging with a flawed framework legitimizes it. Instead, they're urging for a complete rewrite—one that actually protects innovation instead of strangling it with banker-friendly red tape.
A Defining Moment for Crypto's Future
This isn't just another policy debate. It's a battle for the soul of the industry. Will it remain a disruptive force, or become a neatly regulated subsidiary of traditional finance? The draft, as it stands, points toward the latter. The community's response will determine if crypto continues to challenge the status quo, or simply becomes another asset class for banks to slice, dice, and sell with their usual hefty fees attached. The choice is stark: clarity on our terms, or control on theirs.
Ban On Yield Payments In CLARITY Act
In a recent post on social media platform X (formerly Twitter), market expert Nick Cash vocalized his strong opposition, stating that the current iteration of the CLARITY Act must be boycotted.
He described it as a mechanism for banks to manipulate the future of cryptocurrencies, portraying their influence as a detrimental force for innovation in the sector.
The revised version of the CLARITY Act, which serves as a comprehensive crypto market structure bill, introduces significant restrictions on stablecoin issuers like Circle and Ripple. Notably, these firms will be prohibited from offering yield back to passive token holders.
Title IV of the Digital Asset Market Consumer Protection Act (DAMCA) outlines how regulated banking institutions can interact with digital assets, mandating that stablecoin issuers—defined by the GENIUS Act—cannot make interest payments to holders.
Under the proposed changes, while stablecoin issuers WOULD still be able to provide rewards tied to specific actions (such as account openings and cashback), the ban on yield payments poses a serious concern for the crypto industry, which has consistently viewed yield protection as a non-negotiable issue.
Cash argues that the modifications may leave crypto-native issuers positioned at a competitive disadvantage against traditional banks. He warned that such restrictions could severely impact decentralized finance (DeFi) and the overall cryptocurrency landscape.
Expressing his frustration, Cash stated that those supporting the revised bill are essentially siding with banks and undermining the crypto movement.
Strong Public Support For Stablecoin Rewards
Banking institutions have argued that allowing these interest payments could lead to a significant outflow of deposits from insured banks, threatening overall financial stability.
In contrast, crypto advocates counter that blocking crypto exchanges from paying interest on stablecoins is anti-competitive and detrimental to innovation. Summer Mersinger, CEO of the Blockchain Association, articulated her stance, asserting:
What is threatening progress is not a lack of policymaker engagement, but the relentless pressure campaign by the Big Banks to rewrite this bill to protect their own incumbency.
She highlighted that the demand to eliminate stablecoin rewards aims to restrict consumer choice and stifle innovative financial products before they have the chance to compete.
Amid this ongoing CLARITY Act debate, Stuart Alderoty, Chief Legal Officer at Ripple, weighed in, emphasizing that American consumers value their freedom to choose.
He referenced new data from The National Cryptocurrency Association, which indicates a strong public preference—nearly 4-to-1—in favor of allowing stablecoin rewards, along with little appetite for government intervention to curb them.
Ultimately, the future of the CLARITY Act remains uncertain as stakeholders continue to voice their concerns about the implications of increased banking oversight on the cryptocurrency market.
Featured image from DALL-E, chart from TradingView.com
