The banking industry is pushing back against the latest draft of the CLARITY Act, arguing that its language on stablecoin yields does not adequately protect ordinary bank deposits. In a coordinated Monday statement, the American Bankers Association joined several industry groups to say the proposed provisions fall short of the policy goal of prohibiting stablecoin yield in ways that could undermine traditional banking funding models.

The groups—comprising the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum and the Independent Community Bankers of America—emphasized that Congress must get the policy right. They warned that any loopholes could enable platforms to offer bank-like interest on crypto balances outside established regulations, thereby threatening the stability of the banking system and the safety of deposits.

Key takeaways

• The CLARITY Act’s current Section 404 is seen by banking coalitions as insufficient to block stablecoin-related yields on crypto platforms, potentially eroding traditional deposit funding streams.
• Lawmakers such as Senators Thom Tillis and Angela Alsobrooks are pursuing policy language intended to prohibit yields on stablecoins, but banks argue the bill as drafted does not adequately close loopholes.
• Banking groups cite studies suggesting that broad stablecoin adoption could trigger substantial outflows from U.S. banks, particularly from smaller, community institutions that lack flexible balance sheets to absorb such shifts without costly wholesale borrowing.
• Economists cited by banks argue that stablecoin yields could depress broad lending if deposits move to crypto platforms, while White House economists say a yield ban would have a relatively modest impact on lending—though the math remains contested.
• The CLARITY Act currently faces a cautious path through Congress, with doubts about whether it can advance before the midterm elections in November 2026, and with ongoing negotiations over exact wording.

The case for stronger language on yields

The banking groups’ joint statement framed the issue around a central question: how to prevent stablecoin rewards from siphoning off core funding from the traditional banking system. They argue that the proposed language, as it stands, would allow crypto platforms to pay interest or yields on crypto holdings in ways that resemble bank deposits but avoid regulation under conventional banking rules. This, they say, would create a significant regulatory blind spot and potential deposit risk for banks that must compete for funding in stricter regulatory environments.

“It is imperative that Congress get this right,” the groups asserted in their Monday communique, stressing that the current iteration would not fully shield banks or customers from the stability risks associated with stablecoins and their yield mechanics. The statement was issued with the backing of major trade associations representing traditional financial institutions, signaling broad concern across the sector.

The draft’s supporters, including Senator Tillis, have argued that the text represents a practical compromise: it prohibits stablecoin rewards on idle balances while allowing other, non-deposit-related customer rewards. Tillis said the current text strikes a balance that could move the CLARITY Act toward passage on a bipartisan basis, even as some in the banking industry push back against continuing ambiguity.

Nevertheless, the bankers pledged to deliver further “detailed suggestions for strengthening the proposed language” to lawmakers in the coming days, underscoring the push for an explicit, robust prohibition that would close perceived regulatory gaps before any final vote.

Economic modeling and policy tensions

Beyond deposit protection, the debate touches on broader economic implications. The banking groups highlighted studies indicating that widespread stablecoin adoption could lead to substantial outflows from U.S. banks, especially among community banks. They argued these outflows could impair banks’ balance-sheet flexibility, potentially forcing higher-cost wholesale funding if institutions cannot shrink their traditional funding bases quickly enough.

In support of a tougher stance, the coalition cited an analysis from a Stanford-trained economist, Andrew Nigrinis, which framed stablecoin yield as a channel that could drive deposits away from banks and, in turn, depress consumer, small-business, and agricultural lending by a material margin. That line of argument underscores a fear among banks that the policy gap is not merely regulatory loophole but a real economic lever with the potential to constrain credit provision.

On the other side of the ledger, White House economists have presented a more subdued projection. In April, officials argued that banning stablecoin yield would yield only a modest net increase in lending—about $2.1 billion—roughly 0.02% of the banking sector’s total lending. The numbers, while small in aggregate, feed a broader debate about how policy choices translate into real-world lending capacity and consumer access to credit.

The divergent views reflect a broader tension around how tightly to regulate stablecoins and related yield mechanisms while preserving incentives for innovation and financial inclusion. The CLARITY Act’s supporters contend that strong, clear rules are essential to safeguard the financial system and to set a predictable framework for developers and investors. Critics say overly aggressive restrictions could hamper the growth of blockchain-based financial services and DeFi infrastructure, potentially pushing activity overseas or into less regulated niches.

Regulatory horizon and industry reactions

The legislative journey of the CLARITY Act remains unsettled. The bill cleared the U.S. House of Representatives in July with a 294-134 vote, but its path through the Senate—and, crucially, whether it can pass before the elections—remains uncertain. The midterm cycle is typically a bottleneck for major regulatory legislation, and the timing raises questions about whether lawmakers will reach a markup or a final vote in the current session.

For now, the banking industry is signaling that while it supports the aim of prohibiting inappropriate yields on stablecoins, it cannot endorse language that leaves room for “customer rewards” or other compensatory mechanisms that could still undermine deposit protection. Some observers note that the debate could become a proxy fight over the balance between innovation and financial stability, especially as more retail users engage with crypto products through mainstream platforms.

Industry advocates argue that a tightly drafted text would offer a clearer path to bipartisan agreement, enabling policymakers to address both consumer protection and system-wide risk. They contend that any compromise should be explicit about what is prohibited and what remains permissible, to prevent misinterpretation by crypto platforms and by banking institutions adapting to a rapidly evolving landscape.

The broader ecosystem—comprising exchanges, wallet providers, DeFi builders and incumbents—will be watching closely. If the Senate advances a version with stronger prohibitions, it could provide a clearer regulatory signal to developers and investors who have been waiting for durable rules. Conversely, a delay or a watered-down provision could keep ambiguity alive, potentially slowing legitimate innovation and prompting continued lobbying from both sides.

What readers should watch next

The immediate watch point is whether the Senate will bring the CLARITY Act to a markup in the coming weeks and whether a bipartisan framework can be achieved before the midterm deadline. Investors and builders in the crypto and DeFi spaces should monitor how lawmakers translate these concerns into concrete text, and how banks’ deposit stability considerations influence the final shape of the law. While the economic projections cited by proponents and opponents differ, the underlying question remains: will the final version deliver a clear, enforceable boundary around stablecoin yields that protects conventional banking models without stifling legitimate innovation?

As this regulatory arc unfolds, market participants should also factor in potential shifts in platform risk, liquidity dynamics in traditional banks, and the incentive structure facing users who interact with stablecoins and yield-generating crypto products. The outcome will likely affect not only policy clarity for developers but also the calculus of institutions considering how to compete or cooperate with crypto-native financial services in a compliant, transparent manner.

Readers should stay tuned for forthcoming legislative text, committee hearings, and potential amendments that could redefine the balance between innovation and stability in this rapidly evolving sector.

Polygon has introduced a privacy layer for stablecoin transfers, allowing transactions to remain hidden from public view while still meeting compliance checks.

According to a statement released by Polygon on Sunday, the update adds a wallet feature that routes payments through a shielded pool, where verification is handled using zero-knowledge proofs as part of its integration with Hinkal. 

The company said each transaction is screened through Know Your Transaction checks before execution, ensuring that compliance requirements are met even when transaction details are not publicly visible.

Polygon community lead Smokey, writing on X, described the move as a requirement for real adoption, stating that businesses need operational privacy rather than tools designed to avoid regulatory oversight. Polygon, in its own statement, added that confidentiality remains a missing element for institutions that already operate with restricted financial data on traditional payment rails.

Addressing concerns around oversight, Polygon said privacy on its network is designed to limit visibility to the market while preserving access for regulators. Hinkal’s documentation notes that users can generate audit files for authorities, including tax officials, providing a mechanism for post-transaction verification without exposing activity in real time.

The release comes as privacy-focused features continue to gain traction across blockchain networks. Aptos launched its Confidential APT token on April 24, introducing a system that conceals transfer data while maintaining verifiability, with the asset pegged to the value of the native APT token.

Polygon’s move also fits into a wider push to position the network as a payments-focused platform built around stablecoin flows. 

In an April report, Polygon Labs said it was seeking up to $100 million in new funding to expand a payments stack that includes Coinme and Sequence, with CEO Marc Boiron stating that the company’s ambition is to operate as a regulated payments entity in the United States. 

Polygon has said its Open Money Stack is designed to handle cross-chain and cross-currency transfers in a unified system for fintech firms and enterprises.

Data from DeFiLlama shows Polygon’s stablecoin market capitalization reached $3.6 billion on April 10, placing it among the top chains for stablecoin activity. The network has also handled a large share of non-USD stablecoin transfers, according to ecosystem updates cited by Polygon Labs, highlighting its role in processing local currency payments.

Institutional interest in stablecoin payments has grown following regulatory developments such as the GENIUS Act passed in July last year, which supported stablecoin adoption in financial services. Recent activity from traditional firms has added to that trend, with Western Union announcing a USD-pegged stablecoin on Solana on Sunday.

Earlier integrations have already tested stablecoin use cases on Polygon’s network. In April, Meta Platforms began offering select creators the option to receive payouts in USDC through wallets on Polygon and Solana, with payments processed by Stripe and supported by tools for tax reporting.

Uphold has pushed back against the New York Attorney General’s statement on its $5 million CredEarn settlement. 

The company shared the update with crypto.news after the regulator said Uphold misled investors by promoting Cred LLC’s crypto yield product. 

In its response, Uphold said the Attorney General’s statement misrepresented key facts about the settlement. The company also rejected any claim that it knowingly promoted Cred’s alleged fraud. Uphold said Cred misled the company, its customers and other CredEarn users.

NYAG says Uphold promoted CredEarn

The New York Attorney General said Uphold agreed to pay more than $5 million to harmed investors. The regulator said Uphold promoted CredEarn as a reliable savings product while Cred used customer crypto in risky lending activity. 

The settlement document said Uphold advertised CredEarn on its website and mobile app from 2019 to October 2020. It also said more than 6,000 Uphold customers invested about $50 million through the product. Those customers later lost over $34 million after Cred collapsed. 

Moreover, Uphold said it did not know about Cred’s liquidity issues until October 2020. It also said it was unaware that Cred’s statements about the financial health of CredEarn were false. The company said it froze Cred’s access to its platform within hours after learning about the issue. 

Uphold CEO Simon McLoughlin said, “We are deeply disappointed by the New York Attorney General’s statement.” He also said the U.S. Department of Justice treated Uphold as a victim in its criminal case against Cred executives. Uphold said it settled without admitting liability. 

Settlement adds new compliance duties

The settlement requires Uphold to pay $5 million in monetary relief. It also requires any initial distribution tied to Uphold’s $545,189.97 claim in the Cred bankruptcy case to be added to customer payments. 

Uphold must also maintain a risk-based review process before recommending third-party products. That process may include checks on financial records, insurance policies, compliance policies, customer checks, security systems and outside verification. 

Dispute centers on Uphold’s role

The Attorney General said Uphold promoted CredEarn without proper registration and failed to disclose key risks. The regulator also said no insurance existed to protect retail investors from digital asset investment losses, despite statements about Cred’s insurance coverage. 

Uphold gave a different account. It said Cred deceived the company and that it acted to stop further customer exposure once it learned of Cred’s problems. The dispute now centers on whether readers should view Uphold mainly as a promoter of CredEarn or as another party deceived by Cred.

Key Highlights

• XRP currently hovers between $1.39 and $1.41, posting a 1.70% gain over the past day with $2.15 billion in trading activity
• Binance’s 30-day liquidity measurement for XRP has plummeted to 0.038, marking the weakest reading in five years
• Derivative market metrics reveal a 48.27% jump in volume alongside a remarkable 311.69% spike in options activity
• Technical analysts suggest a monthly settlement above $1.50 may trigger bullish momentum toward the $2.20 zone
• Polymarket data indicates the CLARITY Act carries a 64% probability of enactment before 2026

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XRP continues to consolidate around the $1.40 mark following a modest 1.70% uptick over the last 24-hour period. Daily trading volumes registered approximately $2.15 billion, while the aggregate cryptocurrency market capitalization stands at $2.64 trillion.

Bitcoin momentarily surpassed the $80,000 threshold before retracing to approximately $79,700. Ethereum maintained its position above the $2,300 level. These movements helped establish a constructive sentiment throughout digital asset markets.

XRP bounced from its support foundation near $1.35 and has established a series of ascending lows. The primary resistance barrier lies within the $1.42–$1.45 corridor, an area where selling pressure has consistently emerged.

A decisive push beyond $1.45 would bring the $1.50 threshold within striking distance. Chart analysts suggest that securing a monthly closing price above $1.50 would validate an escape from an extended diamond consolidation formation, projecting a technical objective at $2.20.

Market Depth Reaches Historic Lows

The 30-day liquidity measurement for XRP on Binance has contracted to 0.038. This represents the most compressed level observed since 2020, based on information referenced by Arab Chain.

Reduced liquidity indicates a sparse order book environment. With fewer market participants actively posting buy and sell orders, substantial transactions can generate price swings that are both faster and more pronounced than typical conditions would produce.

The noteworthy aspect is XRP’s price stability despite this liquidity erosion. The token has maintained its range while order book depth has quietly contracted. Arab Chain characterizes this as a dual-edged scenario: the subsequent significant capital flow in either direction could catalyze price movement exceeding normal volatility parameters.

Legal commentator Bill Morgan emphasized that macroeconomic market conditions remain influential. He suggested XRP’s regulatory standing might persist independent of legislative developments, though broader market fragility could still exert downward pressure on valuation.

Legislative Probability and Compliance Developments

Decentralized prediction marketplace Polymarket currently assigns approximately 64% likelihood to the CLARITY Act’s passage by 2026. This proposed legislation addresses digital asset categorization and has attracted considerable interest from both policymakers and market participants.

The Senate Banking Committee may conduct deliberations on the measure as soon as mid-May. Recent weeks saw legislators introduce revised language addressing stablecoin yield provisions following extended negotiation periods.

XRP historically exhibits sensitivity to legal and regulatory announcements due to its prolonged engagement with the Securities and Exchange Commission. Enhanced clarity regarding token classification frameworks could influence institutional participation strategies.

Evernorth, a Ripple-supported XRP treasury entity, has named Robert Kaiden — Chief Financial Officer of the OpenAI Foundation — to its governing board. The organization maintains holdings of hundreds of millions of XRP tokens and pursues a $1 billion capital raise preceding an anticipated Nasdaq public offering.

XRP’s options open interest currently registers at $52.89 million, reflecting a 2.81% increase, while aggregate derivatives open interest achieved $2.59 billion.

America’s largest banking groups said they remain dissatisfied with the CLARITY Act’s newly proposed language on stablecoin yield, arguing that it fails to protect bank deposits.

In a statement Monday, the bankers acknowledged that US Senators Thom Tillis and Angela Alsobrooks are “seeking to achieve the correct policy goal” in prohibiting stablecoin yield but noted that the CLARITY Act’s “proposed language” currently “falls short of that goal.”

“It is imperative that Congress get this right,” the American Bankers Association said in a joint statement with the Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America.

The dispute between bankers and the crypto industry over stablecoin yield has stalled the bipartisan bill, which passed the House of Representatives in July by a 294-134 vote. There are concerns that the CLARITY Act may not pass before the US midterm elections in November 2026, which could further hinder its progress.

Banking groups have previously cited studies suggesting that widespread stablecoin adoption could lead to trillions in outflows from the US banking system, particularly from community banks, which may not have enough balance-sheet flexibility to absorb these outflows without resorting to higher-cost wholesale borrowing. 

In the Monday statement, the bankers also cited an article by Stanford-trained economist Andrew Nigrinis to argue that stablecoin yields driving bank deposit outflows “could reduce all consumer, small-business, and farm loans by one-fifth or more, making it essential for the prohibition to be clear and transparent.”

However, White House economists reported in April that banning stablecoin yield may increase bank lending by only $2.1 billion, a marginal net increase of about 0.02%. 

Bankers want “loophole” closed

The bankers contested the language of Section 404, arguing that it allows crypto platforms to pay users bank-like interest or yield outside traditional rules. 

Extract of the “SEC 404. Prohibiting interest and yield on payment stablecoins” document. Source: Alex Thorn

“This is a significant loophole that must be addressed,” the bankers said, adding that they will be sharing “detailed suggestions for strengthening the proposed language with lawmakers in the coming days.”

Related: Lummis says CLARITY Act offers ‘strongest’ developer protections

However, Tillis said the current text of the CLARITY Act strikes a compromise by prohibiting stablecoin rewards on idle balances while allowing crypto platforms to “offer other forms of customer rewards.”

“Most importantly, it helps put us on a bipartisan path to pass the CLARITY Act, providing the regulatory certainty needed to foster innovation. Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree.”

The current text of the CLARITY Act was made public on Friday, with Coinbase and other members of the crypto industry pushing for a Senate markup next week.

Magazine: Will the CLARITY Act be good — or bad — for DeFi?

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Key Takeaways

• Circle’s stock soared almost 20% while Coinbase climbed 6% during Monday’s widespread crypto market rally
• Bitcoin climbed back above the $80,000 threshold for the first time since January’s final days
• Momentum behind the Digital Asset Market Clarity Act sparked renewed confidence among investors
• Two senators reached a breakthrough agreement on stablecoin yield provisions, clearing a major legislative hurdle
• Prediction markets now show 64% probability for the Clarity Act becoming law

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Shares of Circle, the company behind the USDC stablecoin, spearheaded a widespread surge across crypto-related equities on Monday. The stock jumped 19.89% to settle at $119.53, pushing its 2025 returns above the 50% threshold.

Circle Internet Group, CRCL

Coinbase finished the trading day higher by 6.14% at $202.99. Digital asset custody provider BitGo climbed 10.26%. Robinhood shares increased nearly 4%, while SOL Strategies experienced a surge exceeding 17%.

Bitcoin pushed through the $80,000 threshold during Monday trading, hovering around $80,020 at 9:20 p.m. ET. This marked its most robust performance since January’s conclusion. Meanwhile, the CoinDesk 20 Index advanced 1.2%.

The cryptocurrency sector’s strength emerged as traditional U.S. stock markets headed in the reverse direction. The Dow Jones declined 1.13% and the S&P 500 dropped 0.41%, pressured by escalating geopolitical tensions across the Middle East.

The primary catalyst propelling the crypto equity rally was legislative advancement of the Digital Asset Market Clarity Act on Capitol Hill. This legislation seeks to establish comprehensive regulatory guidelines for digital asset markets across the United States.

Senators Reach Stablecoin Yield Agreement

Last Friday, Maryland Senator Angela Alsobrooks and North Carolina Senator Thom Tillis reached consensus on compromise text addressing stablecoin yield mechanisms. This provision had represented one of the bill’s most contentious elements.

The revised text prohibits “covered parties” from distributing any interest or yield forms to American customers purely for stablecoin holdings. It additionally restricts payments that functionally replicate interest earned on traditional bank deposits.

Nevertheless, the agreement preserves the ability to offer incentives connected to actual usage and transactional engagement. This differentiation represents the core of the ongoing policy debate.

Banking industry associations voiced opposition on Monday. They characterized the compromise as inadequate for achieving its stated objectives and urged Congress to eliminate perceived regulatory gaps.

Senator Tillis countered by describing the updated version as a “substantially improved, consensus-based product.” He emphasized that it prevents stablecoin reward structures from mirroring traditional banking deposit interest.

Industry Expert Perspectives

Markus Thielen, who founded 10x Research, stated the compromise eliminates among the last remaining barriers to legislative approval. He anticipates lawmakers will proceed toward official markup sessions potentially within days.

Polymarket, a blockchain-based forecasting platform, currently assigns 64% likelihood to the Clarity Act securing passage before year-end, representing an increase from prior estimates.

Thielen noted that equity investors are beginning to factor in prospective beneficiaries. He highlighted Circle as particularly positioned to gain if stablecoins receive formal classification as payment instruments rather than interest-generating products.

Circle plans to announce quarterly earnings next week. Following its previous February earnings disclosure, the company’s stock price roughly doubled throughout subsequent weeks.

Strategy, holding the largest corporate bitcoin reserves, and Bitmine, maintaining an Ethereum-focused treasury, each registered gains ranging from 3% to 4% during Monday’s session.

Ethereum scaling solution Polygon has launched private stablecoin payments in an effort to attract more businesses and institutions to the chain. 

In a statement on Sunday, Polygon introduced its new wallet feature that enables users to privately route transactions through a shielded pool, with verification handled by zero-knowledge proofs. The move is part of an integration with privacy protocol Hinkal.

“For onchain payments to go mainstream, businesses need privacy. Not ‘hide from regulators’ privacy. Operational privacy,” noted Polygon community lead Smokey on X. 

Privacy was one of the biggest crypto themes in 2025, with many crypto assets tied to privacy projects surging last year despite a broader market downturn. Polygon highlighted the importance of privacy, arguing that many institutions are unlikely to move significant volume onchain without it.

“Confidentiality has been the single biggest gap between onchain rails and what institutional finance actually needs to move serious stablecoin volume,” Polygon said.

“Banks, treasuries and payments teams already live with confidentiality on traditional rails. They won’t move operational flows onto a ledger that broadcasts every counterparty and every amount to every observer on the network.”

Payment process for private transactions vs normal transactions. Source: Polygon

Polygon’s new feature is that it enables users to hide transactions from the public while maintaining compliance and auditability. Polygon said that “privacy means opacity to the market, not opacity to regulators.”

This happens in two key ways. First, every private transaction on Polygon “passes through KYT (Know Your Transaction) screening before execution.” Meanwhile, Hinkal’s documentation indicates that users can generate audit files to hand over to tax officials or regulators.

The move from Polygon comes just weeks after layer-1 blockchain Aptos made its own privacy play by launching the Confidential APT coin on April 24.

The coin is pegged to the value of the Aptos (APT) token and uses zero-knowledge proofs to conceal and verify transfer information.

Related: DeFi can freeze stolen funds, but not everyone agrees it should

The total market capitalization of stablecoins on Polygon hit an all-time high of $3.6 billion on April 10, according to data from DefiLlama, making it the eighth-largest stablecoin chain.

Passage of the stablecoin-friendly GENIUS Act in July last year sparked an uptick in interest and trading volume for the asset class. On Sunday, Western Union became the latest traditional finance firm to launch a stablecoin through its USD-pegged USDPT on Solana.

Magazine: AI-driven hacks could kill DeFi — unless projects act now

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Haun Ventures has raised $1 billion to back early- and late-stage crypto startups, while expanding into artificial intelligence for the first time.

The funds will focus on three areas: crypto financial infrastructure, tokenization and AI agents. The firm’s founder, Katie Haun, called these areas the “new economy.” 

“I’ve been following the flow of assets my entire career, and this is the most dynamic period in technology and finance I’ve ever witnessed,” said Haun, a former US government prosecutor turned crypto executive, in a blog post on Monday.

“The foundations of capital, commerce and trust are undergoing meaningful structural changes,” she added. “The founders who can see across all of it, and build accordingly, will be defining entrepreneurs of this era.”

It’s a significant shift for Haun Ventures, as it is the first time the crypto-focused firm has looked to invest in AI startups, joining a rush of venture firms that are moving into the growing industry.

Crunchbase reported in April that AI firms received a record $242 billion in venture funding in the first quarter of 2026, capturing 80% of the total global venture funding over the quarter, which hit an all-time record of $300 billion.

Haun’s vision for AI agents 

Haun said that AI agents, software that autonomously performs tasks, will “increasingly begin to conduct economic activity on our behalf,” and new products and services would need to be “developed for a world in which computers are the customers.”

AI agents currently make a small number of payments, around $1.6 million worth over a 30-day period as of early March, according to Andreessen Horowitz partner Noah Levine, a number that the Boston Consulting Group expects to rise to $2.4 trillion a year by 2029.

Source: Katie Haun

“Every supporting layer will need to be rearchitected for this world: fraud prevention, credit, insurance, identity, privacy, provenance, reputation, and verification all require native versions designed for how agents transact, and cryptographic tools will be important here,” she added.

Related: DTCC eyes October tokenized securities launch with 50 DeFi and TradFi giants

Meanwhile, Haun said that “the core plumbing of global finance” was being shifted to accommodate an always-on digital world, and noted tokenization as a technology that allowed traditional assets such as gold and oil to be “borderless, always on, and programmable.”

She told Bloomberg on Monday that her company wants to focus on the cross-section of AI agents and crypto infrastructure, wanting to invest in “AI that is in our lane.”

Magazine: AI-driven hacks could kill DeFi — unless projects act now

Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently.

Bitcoin BTC$80,819.40 continues to rally in a move that defies the typical inflation playbook, raises the question of whether the cryptocurrency has quietly crossed over from risk asset to inflation hedge.

The leading cryptocurrency by market value has risen 19% in just over a month, topping $80,000 on Monday for the first time since January. The rally comes as oil hovers above $100 and Bloomberg’s commodity futures index has jumped to a decade high, pointing to inflation in the pipeline. Meanwhile, U.S. consumer inflation expectations are surging.

In the standard playbook, this combination is considered bearish for bitcoin. Rising inflation means the Federal Reserve is likely to keep interest rates higher for longer, while higher rates mean attractive returns on supposedly safe assets such as U.S.

Treasury notes and less incentive to invest in yield-less assets like bitcoin. This logic has worked several times before, most notably in 2022, when the Fed hiked rates aggressively to tame inflation, which partially catalyzed that year’s bitcoin crash.

This time is different

But this time, bitcoin is not following that script. Some analysts are acknowledging the disconnect plainly, raising questions about the durability of the rally. Others say something more fundamental is happening.

“Macro signals remain divided, with commodities pricing supply-side stress while risk assets continue to trade higher. This divergence highlights a growing disconnect across asset classes and raises questions about the durability of the current risk-on environment,” analysts at prominent and long-running exchange Bitfinex said in a report shared with CoinDesk.

Inflation hedge

A different interpretation is gaining traction, suggesting a shift in how BTC is used: from a risk asset to an inflation hedge. And this interpretation is not just circumstantial but backed by renewed inflows into the spot ETFs.

Since March, the 11 U.S.-listed spot bitcoin exchange-traded funds have raised $4.45 billion in investor capital, nearly reversing the massive outflows during the autumn that weighed on the spot price at the time. Most of these inflows are seemingly bullish directional bets rather than the once-popular non-directional arbitrage play, which has not fallen out of investor favor.

“The more interesting shift is happening on the institutional side. Continued inflows into bitcoin ETFs point to a broader change in how hedging is approached. Gold is no longer the default — digital assets are increasingly being considered alongside it, not after it,” Ryan Lee, chief analyst at Bitget Research, said in an email.

Paul Howard, senior director at crypto liquidity provider Wincent, also sees bitcoin as an inflation hedge and has a price target for it. “As both an inflation hedge and a highly liquid store of value, bitcoin possesses several characteristics that could support a 3.5 times increase in price over the next three years,” he said in an email.

The view that BTC is an inflation hedge is no longer confined to crypto circles.

Last week, Paul Tudor Jones, one of the most respected macro traders alive, the man who correctly called and traded the 1987 stock market crash, came out with the most direct endorsement of the bitcoin inflation hedge thesis heard from a Wall Street heavyweight.

“Bitcoin is, unequivocally, the best inflation hedge there is,” Jones said in an interview on the Invest Like the Best podcast. “More than gold.”

His reasoning is structural. Unlike gold, whose supply increases by a couple of per cent each year, bitcoin has a finite supply that can be mined. In a world where central banks have demonstrated a clear willingness to boost the money supply, own the thing they cannot print more of.

Don’t forget stocks

Here is the honest caveat that the bullish inflation hedge narrative needs to reckon with.

Right now, U.S. equities are on a tear, and that is offering positive cues to bitcoin and the broader risk complex, as we noted Monday. In this environment, it is therefore genuinely difficult to draw a definitive conclusion that BTC has evolved into an inflation hedge and that the hedging bid, rather than the risk-on bid, is driving BTC higher.

“After a solid April, BTC has begun May on firm footing, breaking above $80k for the first time since January 31. The move appears aligned with equities, reinforcing a broader trend as BTC’s correlation with US stocks climbing back toward 2023 levels, signaling a renewed linkage with risk assets broadly,” Singapore-based digital assets trading firm QCP Capital said in a market note.

The real test of the inflation hedge narrative comes if and when equities turn lower. If bitcoin holds or rises during an equity sell-off, the narrative gets confirmed. But if it falls alongside equities, the risk asset label will stick.

That test has not arrived yet. Until then, the inflation thesis remains compelling.