Efforts to pass proposed landmark legislation for the U.S. crypto market have stalled to the point that some question whether the measure could still get passed this year, even with White House support, according to new reporting by Reuters. 

The bill, known as the Clarity Act, is intended to establish clearer rules for crypto companies that have long operated in a regulatory gray area. Supporters argue the measure would promote wider cryptocurrency adoption by clarifying when tokens are legally treated as securities, commodities, or other instruments, Reuters reported.

The legislation has been stalled since January, when banks objected to language that would allow stablecoin issuers and crypto firms to offer yield-bearing products and other rewards that could pull deposits from the banking system, complicating banks’ ability to fund lending, sources told Reuters. Crypto companies, including Coinbase, have argued rewards are necessary to attract customers and that restrictions would be anticompetitive.

Standard Chartered has estimated stablecoins could draw about $500 billion in deposits out of U.S. banks by the end of 2028, Reuters said.

The White House stepped in last month to broker a compromise. Under that proposal, stablecoin rewards would be permitted in limited circumstances, such as peer-to-peer payments, but not on idle holdings. Crypto companies have accepted the compromise, but banks have said they cannot support it, the news agency said. 

Banks want tighter limits on the activities for which rewards could be offered, a senior White House official told Reuters. A banking industry source said lenders believe the activities allowed under the compromise could still prompt deposit flight.

Senators also have yet to hash out separate disagreements about the bill’s provisions to prevent money laundering and other illicit activity in the sector, and whether the measure adequately addresses ethics concerns. 

To pass, the bill would need support from at least seven Senate Democrats, Reuters said. Some Democrats want to bar elected officials from profiting from crypto ventures, a provision aimed at the Trump family’s World Liberty Financial crypto company. Other lawmakers have sought tougher anti-money-laundering rules, the news agency said. 

The impasse comes as lawmakers turn their attention toward the upcoming midterm elections. Even if the sectoral disagreements are resolved, the Senate Banking Committee text would still need to be reconciled with a separate draft from the Senate Agriculture Committee, and a shift in congressional power that favors the Democrats could result in further hurdles the measure’s supporters, Reuters noted. 

In a note cited in the report, Stifel strategist Brian Gardner pointed out that the war in Iran is also slowing consideration. “The calendar is becoming the enemy of this bill,” he wrote. 

Read more at Reuters