Clarity Act News: Wall Street Banks Push Back on SEC’s SAB 121

In CLARITY Act news today, the American Bankers Association and Bank Policy Institute issued a joint statement on May 4 opposing stablecoin yield provisions in the CLARITY Act, warning that yield-bearing stablecoins could reduce consumer, small-business, and farm loans by one-fifth or more.

The statement lands amid the broader battle over bank custody of digital assets, shaped decisively by the SEC’s now-rescinded SAB 121, as it continues to define where institutional crypto adoption goes next.

The dispute is no longer abstract policy: it sits directly in the path of legislation that cleared the House with a 294 to 134 vote in July 2025 and has since stalled in the Senate, with November 2026 midterm elections adding pressure on both sides to resolve it or lose the window entirely.

This news comes as Bitcoin USD dropped -1.4% overnight, losing $81,000, and is currently trading at $80,800, leaving investors once more worried about a loss of the $80,000 support level.

CLARITY Act News: SAB 121 and What the Rule Actually Prohibited and Why Banks Fought It

SAB 121, issued by the SEC in March 2022, required banks and broker-dealers to record customer crypto assets as on-balance-sheet liabilities and hold capital reserves equal to their full fair value. This deviated from the norm, where custodial assets don’t appear on the custodian’s balance sheet.

For instance, a bank holding $10Bn in Bitcoin ETF assets would need to set aside an equivalent reserve, making large-scale crypto custody economically unviable.

Despite surviving a bipartisan challenge in 2023, President Biden vetoed it in 2024. The SEC later announced the full rescission of SAB 121 with SAB 122 on January 24, 2025, effective January 30.

Fed Chair Jerome Powell supported this change, stating banks could serve crypto customers, and the American Bankers Association welcomed the move as a removal of “unnecessary barriers.” However, they are now opposing the CLARITY Act’s stablecoin yield language, reflecting shifting regulatory priorities from custody access to deposit protection.

DISCOVER: Next Crypto to Explode in 2026

Why Institutional Crypto Demand Makes the Custody Question Urgent

(SOURCE: CoinGlass)

The timing of SAB 121’s rescission aligns with the current CLARITY Act discussions. Since the launch of spot Bitcoin ETFs in January 2024, products like BlackRock’s IBIT and Fidelity’s FBTC have attracted significant institutional inflows, totaling tens of billions in AUM.

BlackRock’s iShares Bitcoin ETP has reached $1.1Bn AUM on Euronext Amsterdam, indicating a global demand for regulated Bitcoin exposure. In the US, recent single-session net inflows for Bitcoin ETFs hit $378M, with Fidelity FBTC contributing $213M.

The removal of SAB 121’s balance-sheet treatment allows major banks to compete for custody business, but the pace of their involvement will depend on how the CLARITY Act addresses the stablecoin yield issue.

The Coalition Pushing Back: Banks, Crypto Firms, and What Each Side Wants

The ABA and Bank Policy Institute acknowledge the efforts of Senators Thom Tillis and Angela Alsobrooks in crafting the CLARITY Act, but express concerns over its language on stablecoin yield, arguing it allows exploitable loopholes.

The draft permits rewards based on account balances or holding duration and allows crypto platforms to present payments as membership rewards, which they argue incentivizes the idle holding of stablecoins.

Conversely, Coinbase, which previously opposed the bill, now fully supports it following the yield compromise. Faryar Shirzad, Coinbase’s Chief Policy Officer, criticized the banking industry’s objections as unfounded and emphasized that the compromise protects Americans’ ability to earn rewards through platform usage.

The divide between these groups is currently the main hurdle to a final Senate vote, with both sides planning to submit detailed recommendations soon.

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