Scaramucci Warns CLARITY Act Restrictions Make US Dollar Less Competitive Than China’s Digital Yuan

Stablecoin Yield Prohibition and Global Market Implications

The CLARITY Act introduces a prohibition on yield for stablecoins, a move that industry leaders warn could significantly weaken the US dollar's global competitiveness. This legislation prevents crypto exchanges and service providers from offering interest on stablecoins. Critics argue that this creates an uneven playing field, particularly when compared to China's digital yuan, which offers interest on deposits.

China's central bank permits commercial banks to pay interest on digital yuan deposits. This yield feature makes the digital yuan more attractive for international transactions, and experts suggest that emerging economies may favor payment systems that offer such returns. Under the new rules, the US stablecoin framework is not positioned to compete effectively with these yield-bearing foreign digital currencies.

The expanded prohibition on yield-bearing stablecoins in the CLARITY Act could reduce the US dollar’s competitiveness. Industry leaders warn this may give foreign digital currencies an advantage. The law prevents crypto exchanges and service providers from offering interest on stablecoins. Critics argue this creates an uneven playing field compared to China’s digital yuan.

Scaramucci Highlights Competitive Disadvantage

Anthony Scaramucci, founder of SkyBridge Capital, has voiced concerns that the prohibition on yield harms the dollar’s global position. He pointed out that US banks are reportedly resisting stablecoin competition by blocking yield. In contrast, foreign systems like the digital yuan are providing interest, which is attracting more users. Earlier last year, JD.com and Ant Group proposed a yuan-pegged stablecoin to China’s central bank. Analysts are warning that the US risks losing influence in emerging markets due to these regulatory differences.

Industry voices emphasize that stablecoins could offer efficient, interest-bearing alternatives for global transactions. The absence of yield in US stablecoins may lead international users to favor China’s digital currency. Observers are highlighting a growing gap in competitiveness stemming from these regulatory constraints.

Banking and Market Implications

Bank executives are raising concerns that stablecoins could lead to substantial outflows from traditional bank deposits. Bank of America has projected potential outflows of up to $6 trillion if stablecoins continue to grow significantly. A reduction in deposits could consequently limit banks’ lending capacity. Critics suggest that the CLARITY Act is prioritizing the protection of legacy banks over maintaining the dollar's international competitiveness.

The law may also slow the international adoption of US stablecoins. Experts are stressing that foreign digital currencies offering yield could potentially dominate transactions in emerging markets. While the restriction on interest does not significantly affect lending directly, it can influence which digital currencies gain global traction.

Regulatory Background and Debate

The CLARITY Act builds upon the framework established by the earlier GENIUS Act. Both pieces of legislation aim to regulate US dollar stablecoins and uphold financial stability. In June, the U.S. Senate passed the GENIUS Act with a significant 68–30 vote. The new rules introduced by the CLARITY Act further expand prohibitions on yield-bearing stablecoins. Critics, however, argue that these restrictions primarily benefit traditional banks while simultaneously weakening the US dollar’s international standing.

Industry leaders are emphasizing the risk that foreign yield-bearing currencies will achieve broader adoption. Observers note that this regulatory caution may inadvertently diminish US influence in the rapidly evolving digital finance landscape. The ongoing debate highlights a fundamental tension between domestic regulatory objectives and the imperative of maintaining global competitiveness in the stablecoin market.

The expanded CLARITY Act prohibition underscores growing concerns regarding the US dollar’s ability to compete effectively with emerging digital currencies like the yuan. This legislation is likely to shape future adoption trends in emerging markets.