Compiled by: Vernacular Blockchain

As the global crypto market closely watches Bitcoin's fluctuations, a "secret war" determining the fate of stablecoins has quietly begun in Washington, D.C. Is the revised latest Clarity Act a compliance boon for the industry, or a "credential" handed over by politicians to traditional banks?

In this issue of "Stabled Up," we have a deep conversation with FRA founder Sam, uncovering the alarming interests behind the framework: why does the compliance process seem to have unexpectedly made Tether a winner? With Binance's policy of prohibiting yield payments, how is the established DeFi powerhouse utilizing the innovative logic of "charity cashback" to achieve extreme counterattacks?

From a leap of $200 billion to $3 trillion, the latter half of stablecoins is no longer a simple market capitalization competition, but rather an ascension intertwined with traditional banking systems, value policies, and geopolitics. If you want to see through the future investment models of stablecoins and understand the ultimate evolution regarding "money protocols," this article will provide you with the most cutting-edge survival and profit guide.

Feedback from the D.C. Lobbying Front: Political Tug of War for Clarity

Host: Welcome back to Episode 25 of "Stabled Up." Today, we are honored to have FRA founder Sam with us. Sam, it's great to have you back again. We just wrapped up our trip to Washington, D.C., where a lot happened. Rob, Sam, how have you guys been, brothers?

Sam: I’m doing well, thank you. It’s been a while since we last saw each other. So this time it was your turn to take the D.C. route, right?

Host: Yes, the baton was passed well. I was just thinking a few days ago, for the Genius Act, I basically lived in D.C. last March. Now, Fracks is secretly developing a lot of exciting things in the lab while you are holding the fort. Sam, you’ve laid the groundwork, so when we go, there’s plenty of material to discuss.

Obviously, the latest situation is that we just experienced a storm over the new resolution. I mentioned before you joined that it feels like the politicians sold us out. They claimed to present a great resolution regarding stablecoin yields, but this so-called "great resolution" actually states—stablecoins are not allowed to have any yield. It feels like this is not really a resolution, but a victory for the bankers, and prior to this, no founder in the crypto industry would sign off on this agreement. What is your reaction to this so-called "resolution" that just emerged from D.C.?

Sam: Yes, I have been closely following this. But one thing I want to clarify first, for those who haven’t deeply considered the political operations, this is purely a political game. This cessation of funding will not stop because of yield issues, not even after the Clarity Act is passed.

In the U.S., it’s like the Second Amendment (the right to bear arms) issue, constantly tugging between two parties. It’s not that once a bill is passed, everyone stops discussing it. Politicians might pass a bill saying you can’t own more than a certain capacity of magazines, and then next time they say you can’t own guns exceeding a certain length. They push forward bit by bit. That’s how politics works; it relates to the specific details concerning stablecoin yields.

With the Genius Act, we almost achieved overwhelming victory last year. The only concession at that time was that issuers could not claim any legal rights related to the expectation that holding such compliant stablecoins would confer such legal rights. This was actually not a problem, because very few issuers would directly make such commitments. But you could give the yields to issuers, such as centralized exchange partners, to allocate the yield statements. However, under the current Clarity Act amendment, this is basically prohibited.

You will see some activity-based structures. For example, Coinbase has to consider that they can no longer simply call it "USDC Earn," but must emphasize "if you log in and engage in activities." If this bill passes in its current form, in a less friendly SEC environment, regulators might put out guidance saying that the so-called "activities" cannot just be actions with no substantial economic reality. They will restrict you, saying you cannot just log in to get rewards. People in the crypto industry may not be used to viewing politics as a continuous process, rather than a one-time hammer blow that settles everything.

The Shift in Interest Distribution: Who are the True Winners in the Compliance Game?

Host: According to your logic, this modification of wording seems to be filtering different types of players. Since there are heavy obstacles set against directly providing yields, who do you think will benefit from this situation?

Sam: To be honest, although this is not ideal for the overall industry, it is actually very beneficial for the DeFi sector and for stablecoin teams like FRA with strong technological foundations. In contrast, centralized profit projects like Coinbase are less reliable.

In fact, I think under the current wording, aside from the banking lobbying groups, the biggest beneficiary may be Tether. Because Tether has never paid yields to users, and now their competitors (such as Circle) find it even more difficult to pay yields in an open and compliant manner.

Additionally, stablecoin teams like FRAUSD, which are compatible with the Genius Act, are also beneficiaries. We have established extensive partnerships, and if you place FRAUSD in Curve's liquidity pool, the v4 version we are launching next week will have a major feature: we will provide actual risk-free returns (risk-free interest rate) as the basis for the fundamental streaming yield. It will become an important foundational asset, hub hybrid asset, and leveraged asset. Since we are already implementing activity-based risk-free yield streaming distributions, this regulatory environment highlights our structural advantages.

Host: You sound quite confident. Since this is just a part of political evolution, they will bit by bit encroach on interests. Do you believe Brian Armstrong of Coinbase will pause pushing this bill through? We spoke with the CEO of the Solana Policy Institute, who said we must accept the trade-offs: either wrap things up before the July recess, or push it to 2027. It was just reported that Coinbase will oppose the current version of the bill.

Sam: Brian's opposition was expected. But let’s ask it another way: does Brian really have the power to sign off on this? My understanding is that politicians can push this forcefully despite the thoughts of the crypto industry. They just don't want to offend anyone, and both banks and the crypto industry have plenty of actions. If the politicians obtain far more chips from one side than the other, they will lean that way.

The Genius Act is already very well-structured, which is why traditional financial forces are now trying to amend it. Given the balanced election and the current macro situation, if it cannot be passed before July, the future becomes unpredictable. But considering, I think this might be the last or second to last amendment. Regardless of whether the Clarity Act passes, we at Fracks are quite excited. Our core business is to provide risk-free yields in the form of secure stablecoins at the most important on-chain nodes (like Curve pools, AMMs, Bitcoin platforms).

From Yields to "Cashback": Compliance Innovations in DeFi and New Banks

Host: You mentioned an "activity-based" distribution model. How does this manifest in real-world payment scenarios beyond on-chain DeFi protocols?

Sam: This is a very interesting transformation process. For example, we are collaborating with EtherFi to develop a card. You could design a system where users swipe a bunch of Genius Act compliant stablecoins, and we calculate the “subsequent activity volume” using an algorithm based on factors like card frequency, time weight, and balances.

The interesting part is, if you pay these accumulated yields in the form of cashback, this is not, legally speaking, a taxable event. The IRS has made it clear that credit card cash back does not need to be included in annual tax returns, being viewed as a discount or rebate, rather than new income. Through well-integrated DeFi aided by cooperation with new banking teams, we can convert this activity-based mandatory requirement into a highly attractive new product—what users essentially gain is risk-free and financially beneficial yields, rather than traditional dividends.

Host: So the EtherFi card is a typical example of how to turn complex regulatory requirements into a compliance structure that benefits end users.

Sam: Exactly, and this is already online. The EtherFi team is excellent, and they have integrated the risk rates for FRXUSD, distributing daily based on activity and holdings. If you are a U.S. user, this model has a significant advantage under the current rules.

Host: I’m curious; you mentioned that the Genius Act was initially almost perfect. Why do you think the bankers found it so easy to pass? Were they negligent at that time?

Sam: They were absolutely not negligent. People in D.C. will tell you, those bank lobbyists have always been on the lookout. But they were indeed caught off guard by the pace of changes in the industry after the November elections. Everyone suddenly became super pro-crypto, and the bill advanced much faster than anticipated. Moreover, authors Lummis and Hagerty are very professional and are excellent leaders in the crypto industry.

Banks did try to soften their resistance, but now that the Genius Act has passed, the cat is out of the bag. Compliant secure stablecoins are already present and beginning to be used in important areas. The only question is: at what level will yields be allowed to be distributed? Who can provide the most diverse user experiences?

Leap Growth: The Vision for Stablecoins in 2027 and the $3 Trillion Goal

Host:Sam, regarding this legislation. Do you think we should persist in pushing for the Clarity Act to pass? Compromising on yield issues? We need its main purpose to guide solidification into law and prevent future variations by SEC chairs. But if the law can be easily amended, where lies its critical nature?

Sam: Legislation and amendments are indeed hard to modify, which is why banks are currently pushing for impediments. Chair Atkins’ current guidance, but guidance can change with government rotations. The reason the former chair did not provide clear guidance is that he understood politics; once rules are locked in, the industry would quickly innovate (for example, shifting from ICOs to reward points) to circumvent.

The Clarity Act is a pro-crypto bill. It makes it difficult for those politically opposed to cryptocurrencies to easily overturn existing favorable guidance. It is not the end; certainly, by 2027, new amendments will be stuffed into major spending bills. But as an important milestone, I clearly support passing it.

Host: Regarding the future dynamics of stablecoins, you mentioned the competition between Tether and Circle. We also know Tether is hiring the Big Four audit firms. Do you think Circle's regulatory arbitrage advantage will be substantial due to the bills?

Sam: As I said, Tether wins in their current situation where they do not have to pay yields, which aligns well with the new bills. And the real explosive point occupies many bank access points. We are communicating with banks and neo-banks. I have a hunch that in 6 to 12 months, we will discover that many mainstream banks, Visa, and even institutions like Wells Fargo will start accepting some compliant stablecoins as actual deposits.

Once you can directly transfer stablecoins into traditional bank accounts or send them directly to real estate custodians to purchase houses without going through complex conversion processes, the total market capitalization of stablecoins will experience leap growth. Currently, it is around $200 billion, which could jump to $500 billion in just a few months. This process involves slow accumulation followed by a sudden leap.

Host: Scott Bessent predicts that stablecoin market capitalization will reach $3 trillion by 2028. Do you think this expectation is realistic?

Sam: While I don’t know if he reached a true breakthrough or the potential risks of war, I still believe this estimate is achievable. It will not be a linear slow rise, but rather realized in a leap function form. Once the infrastructure matures, some stablecoins will become true global currencies.

Host: For beginners, can you clarify this structure?

Sam: The market is becoming increasingly mature, capable of accurately distinguishing assets. For instance, Circle's stock recently dropped 20% due to statements regarding bill adjustments, as the market realized their issuance model was hit hardest, indicating that investors already know how to price these differences.

Stablecoin investments now have several different dimensions: there are great yield DeFi stablecoins; Athena has its unique hedging argument; and for currency-like stablecoins such as FRAUSD pursuing a trillion-level market, their value lies in on-chain deep penetration. If you want to lay out a strategy, you need to see who is being used in the most important places on-chain and who is held by the most cutting-edge new banking products. In this on-chain "footprint" determines who ultimately makes it onto the bank's whitelist.

Host:Sam, thank you very much for your sharing today. Your unique insights on the Clarity Act have inspired many. Currently, prediction markets show a 61% probability of the bill being signed in 2026, and I hope that when you return next time, we will have crossed this milestone.

Sam: Thank you for inviting me, brothers. See you next time.

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