WASHINGTON, D.C.: Talks over a landmark U.S. cryptocurrency bill have stalled again after banks rejected a compromise proposal backed by the White House, raising fresh doubts about whether the legislation can pass this year.

The setback triggered criticism from President Donald Trump, who accused lenders of trying to undermine the effort. Trump, who supported the crypto industry during his campaign and whose family has launched its own token, has made crypto reform a priority during his second administration.

"We are not going to allow them to undermine our powerful Crypto Agenda," Trump wrote on February 3 on his Truth Social platform.

Crypto firms have long argued that operating under unclear regulations has slowed innovation and investment. Supporters say the proposed Clarity Act would establish clear rules governing digital assets and help accelerate cryptocurrency adoption in the United States.

Dispute Over Rewards

The bill first stalled in January after banks objected to provisions that would allow stablecoin issuers and crypto companies to offer yield-bearing products and other incentives to customers. Lenders fear such rewards could draw deposits away from traditional banks, making it harder for them to fund loans.

Crypto companies, including Coinbase, say offering rewards is essential to attracting users and that banning them would be anti-competitive.

Standard Chartered has estimated that stablecoins could pull about US$500 billion in deposits from U.S. banks by the end of 2028.

Last month, the White House attempted to broker a compromise between the two sides, according to four people familiar with the negotiations. The proposal would permit rewards in limited situations, such as peer-to-peer payments, but not on idle stablecoin holdings.

While crypto companies have largely accepted that framework, banks have refused to support it.

Banks still want stricter limits on the types of activities that could offer rewards, according to a senior White House official. A banking industry source said lenders believe even the proposed restrictions could still lead to deposit flight.

Some senators support the banks' position, and lenders believe they could secure more favorable terms with their backing, the source said.

The Senate Banking Committee, which is responsible for drafting the legislation, declined to comment.

The American Bankers Association said in a statement that banks had offered constructive proposals to improve the bill.

"The risks to economic growth and financial stability are real if policymakers don't get this right."

Limited Time Before Elections

The deadlock has raised doubts about whether lawmakers can pass the bill this year, according to industry sources and analysts.

The measure also faces disagreements among senators over ethics rules and anti-money laundering provisions. At the same time, congressional floor time is limited before lawmakers leave Washington this summer to campaign for mid-term elections.

"If this doesn't get passed and put in front of the President's desk, I'd say by July, I think everyone feels that, generally, that window will have been closed because of the mid-terms," said Adrian Wall, managing director of the Digital Sovereignty Alliance, which advocates for pro-crypto policies.

"It will be a tremendous setback that will be very difficult for us to overcome."

Prospects for passage could become even more uncertain depending on the outcome of November's elections. Democratic lawmakers remain divided on proposals to overhaul federal crypto regulations.

Other Obstacles Remain

For years, the crypto industry has pushed for legislation clarifying when digital tokens should be classified as securities, commodities, or other assets.

The industry spent more than $119 million supporting pro-crypto candidates in the 2024 elections, hoping to advance both the Clarity Act and a separate stablecoin bill that became law last year.

That earlier law banned stablecoin issuers from paying interest directly. Banks argue it left a loophole allowing exchanges and intermediaries to offer rewards, which they want the new legislation to close.

Negotiations have included executives from companies such as Coinbase and Ripple, as well as industry groups such as the Blockchain Association.

Summer Mersinger, chief executive of the Blockchain Association, said in a statement that "the path to a workable agreement is clearer than it was a month ago."

Ripple declined to comment but has previously welcomed White House efforts to reach a deal.

Even if negotiators resolve the banking dispute, the bill faces additional hurdles. Some Democrats want it to bar elected officials from profiting from crypto ventures — a proposal aimed at the Trump family's World Liberty Financial initiative.

Analysts say Trump would be unlikely to sign legislation containing such a provision.

Lawmakers have also called for stronger anti-money laundering rules.

Once those issues are addressed, the Senate Banking Committee's version of the bill would still need to be reconciled with a separate draft from the Senate Agriculture Committee. The final proposal would then compete for floor time alongside other legislation, including housing policy reforms.

Escalating geopolitical tensions could further complicate the timeline. Brian Gardner, chief Washington strategist at Stifel, said the conflict involving Iran may make it harder for Congress to prioritize crypto legislation.

"The calendar is becoming the enemy of this bill," he wrote in a note on February 3.