05-06-2026 
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U.S. crypto operators hope a new stablecoin compromise will revive stalled digital asset market structure legislation, but bankers still aren’t on board, and frankly, the general public doesn’t give a damn.
- Crypto sector celebrates CLARITY stablecoin ‘compromise’
- Banking sector still not hopping on this bandwagon
- CLARITY’s DeFi, ethics issues still up in the air
- World Liberty Financial v Justin Sun legal fight heats up
- WLFI governance ‘proposal’ angers token holders
- Politico poll finds voters really don’t like crypto operators
- Voters don’t trust Trump to oversee crypto
On May 1, Punchbowl News was first to report on a proposed solution to the stablecoin stalemate preventing forward progress of the CLARITY Act, the Senate’s digital asset market structure legislation. About time, too, since it’s now been over three months since the Banking Committee called off a scheduled CLARITY markup after the Coinbase (NASDAQ: COIN) exchange abruptly withdrew its support for the bill the night before the session.
Crypto operators like Coinbase want to go on offering their users ‘rewards’ for holding stablecoins on their platforms, but banks are staunchly opposed, fearing mass deposit flight from bank customers seeking higher interest rates. The banks want crypto platforms to be held to the same ‘no yield’ restrictions imposed on stablecoin issuers in the GENIUS Act that Congress approved last year.
On the surface, the latest compromise doesn’t appear all that different from previous efforts by the bipartisan Banking team of Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) to pacify both crypto operators and bankers.
Basically, rewards for passively holding stablecoins on crypto platforms would be forbidden, but certain “activity-based or transaction-based rewards and incentives” will be permitted, so long as they “are not economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”
Examples of these permissible activities could include “a transaction, payment, transfer, conversion, remittance, or settlement activity, including a rebate or incentive” linked to stablecoin use. Also, kosher are providing liquidity for market-making and “participation in a governance, validation, staking, or a loyalty, promotional, subscription, or incentive program,” again, so long as these programs don’t resemble passive yield.
The language calls on federal agencies and the Treasury secretary to craft regulations specifying the nitty-gritty of what’s permissible within one year of CLARITY being enacted. The agencies/Treasury are also given the discretion to tweak the rules governing “circumvention or evasion” of the yield prohibitions as they deem fit.
Reaction from the crypto sector was largely positive, with Coinbase’s chief policy officer, Faryar Shirzad, tweeting self-congratulations for having “protected what matters, the ability for Americans to earn rewards, based on real usage of crypto platforms and networks.” Shirzad closed by saying “it’s time to get CLARITY done,” to which Coinbase CEO Brian Armstrong replied: “Mark it up”.
Banking Committee chair Tim Scott (R-SC) tweeted Monday that his panel was “nearing consensus” on CLARITY and “working toward a bipartisan markup in May to advance digital asset market structure.” The hope among crypto fans is that a markup could take place as soon as next week.
Odds of CLARITY passing this year on prediction market Polymarket stood at 68% by late Tuesday, a significant improvement from the 42% odds on April 25. A similar surge was evident on rival Kalshi’s CLARITY market.
However, the banking sector was noticeably silent amid all the crypto jubilation. And no one was all that surprised when they finally voiced their displeasure.
Bankers still agin’ it
On May 4, the banking sector issued a ‘banking trades statement’ representing the shared opinion of the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America.
The statement praised Tillis and Alsobrooks for working to address bankers’ concerns and “seeking to achieve the correct policy goal—prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal.”
The bankers said it’s “essential for the prohibition to be clear and transparent,” and they “will be sharing our detailed suggestions for strengthening the proposed language with lawmakers in the coming days.”
The bankers did offer a few specifics re potential ‘evasion’ of the proposed guardrails by crypto operators. For instance, the banks say the language would allow third-party platforms to offer users rewards for participating in a membership program, “so long as the payments are not calculated or distributed like banks’ payment or distribution of interest or yield. This is a significant loophole that must be addressed.”
Furthermore, the compromise “allows for permissible rewards to be calculated by reference to duration, balance, and tenure. Overtly incentivizing the idle holding of payment stablecoins for extended periods of time, and for specific balances, would negate the goals of the upfront prohibition (to deter deposit flight) while tying rewards directly to how much/long customers hold payment stablecoins in wallets or exchanges.”
The joint statement prompted Tillis to tweet that the compromise being offered was “a substantially improved, consensus-based product” that followed months of work with all stakeholders, including banks, having “a seat at the table.” Tillis said he would have to “respectfully agree to disagree” with the banks’ latest position.
On May 5, Crypto in America’s Eleanor Terrett tweeted about “a divide” in the banking sector in which larger banks want the rules tightened more than the smaller community banks that were originally flagged as the chief opponents of stablecoin rewards.
Terrett said an unspecified larger bank believes the rewards language is “drafted too narrowly and still leaves room for crypto firms to work around the restriction. It’s not a true compromise because it doesn’t eliminate yield completely, it just changes how it’s offered.”
White House crypto advisor Patrick Witt, who appears to have lost all patience with the banking sector’s obstruction long ago, replied to Terrett’s tweet by noting that “banks sure have a funny way of defining ‘compromise.’”
Defi, ethics stumbling blocks remain
Sen. Alsobrooks may be satisfied with the stablecoin compromise, but she expressed concern over other unspecified aspects of CLARITY that require “some more compromise and improvement” before the bill will receive her committee’s ‘aye’ vote.
For instance, there’s still no consensus on whether CLARITY should include language resembling the Blockchain Regulatory Certainty Act (BRCA). The BRCA would offer developers of non-custodial decentralized finance (DeFi) platforms some legal immunity when their platforms are used by others for illicit purposes.
While the BRCA is wildly popular with the crypto sector, several U.S. law enforcement agencies are protesting its inclusion in CLARITY. Cops fear the language will hinder both investigations and prosecutions involving digital assets.
The Senate Judiciary Committee also isn’t a fan of DeFi immunity, believing the issue to be an unwarranted incursion by Banking into the Judiciary’s regulatory turf. On May 4, Crypto in America reported that Judiciary Chair Chuck Grassley (R-IA) was expected to have discussions about resolving the DeFi impasse this week.
On May 4, the White House’s Witt said he and Banking member Cynthia Lummis (R-WY) have been working with both crypto operators and law enforcement organizations on “a compromise that we believe addresses Senator Grassley’s concerns.” Witt expressed confidence that the DeFi issue “should be resolved very soon.”
Even if the DeFi dragon is slain, there’s still the ‘ethics’ issue, aka the desire of Banking Dems (and Sen. Tillis) to prohibit elected officials—including President Trump—and their families from profiting off crypto ventures for which these officials have some ability to clear a regulatory path.
With current polls projecting a strong showing by the Dems in the November midterm elections and barely a week going by without some new computation of the ten-figure crypto windfall the Trump family has enjoyed since Don’s return to the White House, Dems might prove harder to budge on ‘ethics’ than on other CLARITY issues.
It doesn’t help that stats are circulating that show digital wallets likely controlled by non-U.S. residents were responsible for 76% of purchases of the controversial $TRUMP memecoin and 72% of the sales of WLFI, the even more controversial token of the Trump-linked DeFi project World Liberty Financial (WLF).
Ethics, meet Justin Sun
Speaking of WLF, the project just filed a defamation suit against one of its largest foreign investors in a rapidly escalating legal tit-for-tat that promises to expose all sorts of information neither side likely wants made public.
On May 4, WLF announced that it was “filing a lawsuit against Justin Sun for defamation” in Florida’s Eleventh Judicial Circuit Court. WLF accused the TRON network founder of having launched “a coordinated smear campaign against [WLF] and refused to stop even when confronted with the truth.”This first shots in this fight were fired last September, when WLF blacklisted wallets containing most of the $75 million worth of WLFI acquired by Sun since the token’s October 2024 launch. Last month, Sun fired off some angry tweets accusing WLF of using a “backdoor blacklisting function” and claiming to be this weapon’s “single and largest victim.”
On April 21, Sun sued WLF in California federal court, tweeting that his goal was “to protect my legal rights as a holder of $WLFI tokens.” Sun chose his words carefully, slamming WLF for refusing to “unfreeze my tokens and restore my rights as a token holder” while claiming the suit “does not change how I feel about President Trump,” who he praised for his “efforts to make America crypto friendly.”
Large sections of Sun’s suit were redacted before it was filed online, but it alleges that WLF is on the brink of “collapse and potential insolvency,” without explaining why. Sun’s attorneys also accused WLF of trying to “leverage” his frozen tokens “as a bargaining chip to extort Mr. Sun into providing additional capital for [WLF].”
Sun had particularly harsh words for WLF co-founder Chase Herro, the self-proclaimed ‘Dirtbag of the internet,” citing Herro’s “lifelong pattern of fraud.” The suit accuses Herro of telling a court that he resides in Boca Raton, Florida, while elsewhere “falsely claiming Puerto Rico residence to avoid paying his federal income tax obligations.”
The day after Sun’s suit was filed, President Trump’s son, Eric, tweeted that Sun’s suit was “ridiculous” and claiming to be “incredibly proud” of the WLF team. WLF CEO Zach Witkoff responded by calling Sun’s suit “a desperate attempt to deflect attention from Sun’s own misconduct.”
Witkoff claimed Sun had engaged in “prohibited transactions,” including trying to short-sell WLFI prior to his tokens being frozen. WLF’s lawsuit further alleges that Sun engaged in “straw purchases” of WLFI on behalf of undisclosed third parties.
WLF also mocked Sun’s claims that the freezing function was some kind of secret weapon, noting its existence is disclosed in the WLFI sale terms. The suit accused Sun of having “weaponized his money and his influence within the industry, hiring influencers and deploying fake social-media ‘bot’ accounts to amplify his lies. His actions were coordinated, deliberate, and aimed at burning World Liberty to the ground.”
Undaunted, Sun called WLF’s defamation suit “nothing more than a meritless PR stunt” and said he looked forward to “defeating the case in court.”
WLF governance boondoggle
Sun also said he “strongly oppose[s]” the controversial governance proposal WLF launched last month. It’s worth noting that Sun was ineligible to participate in the proposal due to his frozen WLFI tokens.
On April 15, WLF proposed prohibiting the sale of over 62 billion locked WLFI for a two-year period, with additional two- or three-year vesting schedules to follow. Around 45 billion of these tokens are held by founders/advisors/partners, while the other 17 billion were snapped up by early investors.
As part of this process, roughly 4.5 billion of insiders’ tokens would be burned. But if that ‘sacrifice’ was meant to pacify the non-insiders who were looking at multi-year obstacles to cashing in the 80% of their chips they aren’t yet allowed to sell, it didn’t work.
Regardless, given the size of the insiders’ bags, the outcome of this vote was never in doubt, leaving other WLFI holders seriously annoyed. The mood wasn’t helped by the fact that holders who voted against the proposal were told their tokens would be “locked indefinitely under existing terms subject to any future unlock proposals.”
Meanwhile, last week saw Bloomberg break the news that WLF had authorized sales of an additional 5.9 billion WLFI to private investors, earning WLF hundreds of millions of dollars in transaction fees, the majority of which goes to entities linked to the Trump family. These additional sales weren’t previously disclosed.
It’s worth quoting Bloomberg’s Olga Kharif at length: “What is unfolding has no precedent in American financial life. A sitting president’s family holds financial stakes in a live token project—one setting governance rules, directing treasury sales, collecting proceeds—while the people who signed up find themselves with limited options to exit.”
WLFI is currently trading below $0.07, having lost 54% of its value since the year began. The current price is barely one-fifth of its all-time high sent last September.
Voters hate crypto PACs
Crypto-focused political action committee (PAC) Defend American Jobs (DAJ) recently copped to spending nearly $514,000 in support of Rep. James Baird’s (R-IN) bid to retain his House of Representatives seat come November.
DAJ is a Republican-focused offshoot of Fairshake, the dominant crypto PAC that leans primarily on the financial support of Coinbase, XRP-issuer Ripple Labs, and the tech-focused Andreessen Horowitz (a16z) (NASDAQ: ZADIHX) venture capital group. Fairshake has already spent $13.2 million in the current election cycle and still has over $193 million to ensure crypto-friendly candidates win their races.
Meanwhile, Ripple co-founder Chris Larsen has given $3.5 million to You Can Push Back, a new super PAC backing Alex Bores in the Democratic primary to replace outgoing Rep. Jerry Nadler (D-NY). Bores holds a ‘strongly supportive’ A-rating from Coinbase’s astroturf group Stand with Crypto, but the groups opposing Bores include Think Big, a pro-AI PAC backed by (among others) a16z. (Bores is in favor of strong federal regulation of AI.)
Politico released some interesting survey results over the weekend, including the fact that just 3% of the 2,035 respondents claimed to have heard of Fairshake. But the survey also revealed the primary reason that most crypto PACs don’t mention crypto in their ads promoting favored candidates or knocking candidates who aren’t crypto-friendly: the public hates that shit.
The survey found “broad public skepticism about crypto and AI, creating a possible conflict for candidates benefitting from an influx of contributions from the two industries.”
While nearly one-fifth (19%) of respondents claimed to have bought or traded digital assets and another 16% said they’d at least consider doing so, 53% said they hadn’t gone anywhere near buying/trading tokens and “would not consider doing it.” (That’s below the 56% who wouldn’t consider placing a bet on a prediction market but much higher than the 40% who won’t dabble in the stock market.)
Of those who do or have dealt with crypto, 22% had nothing but digital assets in their portfolio, another 21% had ‘most of’ their portfolio in tokens, and 11% said tokens made up ‘about half’ of their nest egg. But 16% said crypto now made up ‘none of’ their portfolios, a significant ‘once burned, twice shy’ cohort.
When asked whether ‘special interest groups’ had too much or too little influence over U.S. politics, 41% said too much while just 12% said too little. Asked the same question re the political influence of billionaires (including PAC-supporting CEOs), 61% said they exerted ‘too much’ influence over politics while just 7% said ‘too little.’
Asked which individuals or groups were spending the most money to influence election outcomes, 13% cited crypto operators, the sixth-highest result. That’s nearly twice the 7% that said groups opposing crypto operators are spending the most. AI/tech interests ranked second with 21%, behind only the oil/gas sector (29%).
Just 17% of respondents said they’d trust a crypto platform (with Coinbase cited as an example) with their money. Only 9% said they’d trust a crypto platform more than a bank to hold their assets. Nearly half (47%) said they’d trust banks more than crypto platforms.
Similarly, only one-quarter of respondents agreed that ‘investing in cryptocurrency is a risk worth taking for high returns,’ compared with 45% who believe the risk isn’t worth the potential rewards. Nearly one-third (30%) expressed uncertainty regarding the risk v rewards.
Voters don’t trust the Donald on crypto
A different Coindesk survey of 1,000 randomly selected U.S. voters found nearly two-thirds (65%) of respondents said they trusted banks over crypto platforms when it came to safeguarding their funds, compared to just 5% who put more faith in crypto operators. Worse, 60% believe crypto is a mostly negative force in the overall economy.
While 52% of respondents said crypto is more than a passing fad, nearly half (46%) want nothing to do with it. Around 53% of respondents said they got a less than favorable impression about crypto from recent news coverage.
Coinbase also found that crypto ranks near the bottom of voters’ priorities when it comes to the midterms, with only 1% of respondents citing it as their primary concern. AI issues ranked only slightly better at 2%.
Some 47% of respondents viewed Republicans as more supportive of crypto issues than Democrats (14%). But Dems held a slight edge (27%) over Republicans (25%) when it came to which party voters trust to handle crypto issues. Around 40% of respondents said they were more likely to vote for a candidate that mirrored their crypto views, pro or con.
A solid majority (62%) of voters have no faith in the Trump administration’s capacity to properly oversee crypto issues. An even higher majority (73%) disapprove of senior government officials having ‘personal business with the crypto industry,’ with 41% strongly disapproving (versus just 6% strongly approving).
Unsurprisingly, disapproval is much higher among base Dem voters (80%) and independents (80%) than the GOP’s base (59%). But 55% of respondents claimed to have either ‘not much’ or zero awareness of the depth and breadth of the president’s commercial crypto interests, and it’s reasonable to think overall disapproval would be even higher if they had greater knowledge of these issues.
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