In a report published on Thursday, Reuters said the long-awaited cryptocurrency market structure legislation, known as CLARITY Actmay not be passed in 2026. The uncertainty comes as opposition from the banking industry grows, particularly over key provisions related to the regulation of stablecoins.

Deadlock in cryptographic legislation

According to reportlegislation has reached a recent impasse after banks refused to support a compromise proposal put forward by the White House. This breakdown in negotiations raises solemn doubts about whether Congress will be able to move the bill forward before the legislative window narrows for the midterm election season.

Banks have opposed legislation that would allow stablecoin issuers and other cryptocurrency companies to offer profit-making products and rewards to customers. Lenders argue that such incentives could lure deposits away from established banks, making it harder for them to fund loans and support credit creation.

For their part, crypto companies maintain that the ability to offer rewards is indispensable to attract users and remain competitive. They argue that prohibiting such incentives would amount to an anti-competitive restriction designed to protect incumbents.

In an attempt to break the impasse, the White House stepped in last month to broker a compromise. The administration proposed a permit stablecoin rewards in restricted contexts, such as peer-to-peer (P2P) payments, while prohibiting rewards for unused balances.

Four people familiar with the private negotiations said the proposal aims to strike a balance between innovation and deposit stability. Crypto companies have reportedly accepted this compromise. However, banks have signaled that they still cannot support it.

The banking sector demands more stringent remuneration rules

Two sources told Reuters that lenders want much tighter restrictions on the types of businesses eligible for the awards. A senior White House official indicated that banks remain concerned about this being even tighter structure could accelerate the outflow of deposits.

The banking industry source added that some lenders believe the actions allowed under the compromise would still significantly weaken the deposit base.

Several senators are said to support the banking sector’s position, and industry representatives believe that with such political support they will be able to secure more favorable conditions.

Beyond the stablecoin dispute, the bill faces additional political hurdles. Lawmakers are divided on regulations regarding ethics and illegal finance.

Time is running out to approve the CALRITY Act

Time is another significant obstacle. Senate session time is restricted, especially as lawmakers prepare to leave Washington in the summer to begin campaigning for the midterm elections.

Adrian Wall, managing director of the Digital Sovereignty Alliance, a cryptocurrency advocacy group, said the window for a transition was closing quickly. If the bill is not approved and sent to the President by July, he argued, it will be increasingly tough to return to momentum before the elections.

After November, the political calculus may become even more complicated. If Democrats gain seats in Congress, passage is likely cryptocurrency-friendly legislation may decrease even further.

The development of the geopolitical situation increases uncertainty. According to Brian Gardner, chief Washington strategist at Stifel, the war in Iran will make it even more tough for Congress to devote attention to cryptocurrency regulation this year.

In a memo released Tuesday, Gardner wrote that the legislative calendar is increasingly harming the bill. “The calendar becomes the enemy of this act,” he said.

Featured image from OpenArt, chart from TradingView.com