The banking lobby’s bad faith campaign to kill the Clarity Act will backfire

The Digital Asset Market Clarity Act, a landmark bill to bring crypto assets into the economic mainstream, is on life support.

This comes despite months of hard work and compromise for a set of rules that would be overwhelmingly positive for America by creating new business opportunities and reducing the risk of another FTX.

Polymarket currently has the odds of passage this year at 25%.

The bill known as Clarity has struggled to get across the finish line for multiple reasons, but the biggest has arguably been the vicious interference campaign run by the banking industry.

Their gripe? The fact the Genius Act —an important stablecoin law that passed last year—only bans direct interest payments to customers, which left the door open for third parties to reward their clients who use stablecoins like USDC.

Clarity wasn’t supposed to be about stablecoins at all, but the banks weren’t content with the protectionist measures they’d already won, so they held Clarity hostage.

If you didn’t know any better and saw the scorched-earth tactics used to make their case, you’d assume American banks were in some kind of trouble.

That their deposits must already be so scarce—and their profits so scant—that the industry needs government protection just to survive.

How else do we explain the unlikely allies they found for their anti-stablecoin crusade, ranging from progressive think tanks to the Wall Street Journal editorial board ? But fear not, for the state of banking in the Union is strong.

Profitability is up and the regulatory burden is down —two reasons why the KBW Bank Index has outperformed the NASDAQ over the past year.

At the center of the current boom is the $740 billion in net-interest income (NII) the industry took home last year, per government data .

NII is the purest measure of how much money banks make from the simple act of taking money from depositors and lending it to borrowers, and at three-quarters of a trillion dollars, is a very big number.

Larger than the GDP of Australia, or what the Magnificent Seven ( Alphabet , Amazon , Apple , Meta , Microsoft , Nvidia , and Tesla) made in net income during the same period.

Nobody in their right mind would argue that Alphabet and Nvidia need laws to protect them from competition, but lots of otherwise intelligent people believe that banks, an even more profitable group of companies, do need such protection.