Summary
The American Bankers Association, the Independent Community Bankers of America, and 76 state banking associations have urged Senate leaders to amend the stablecoin provisions of the CLARITY Act, arguing that the current draft's allowance for "activity-based rewards" could enable stablecoins to function similarly to bank deposits. The banking coalition frames the issue as deposit defense: if customers can earn rewards on stablecoins, banks could lose the funding base that supports lending to consumers, small businesses, and farmers.
The current draft attempts to distinguish between deposit-like yield (prohibited) and activity-based or transaction-based rewards (permitted). The Tillis-Alsobrooks compromise improved the language, but banks say it still risks unintended loopholes. The Conference of State Bank Supervisors has also weighed in, urging limits on federal preemption of state money transmission regulation. The lobbying effort adds another obstacle to the CLARITY Act's already tight 25-day Senate window, with Galaxy Digital cutting passage odds to 50-50.
Key Facts
- ABA, ICBA, and 76 state banking associations urge Senate to amend CLARITY Act stablecoin provisions
- Concern: "activity-based rewards" could function like bank deposits, pulling funds from banks
- Current draft bars interest/yield "solely in connection with the holding" of payment stablecoins
- Permits activity-based or transaction-based rewards — banks say this is a loophole
- Tillis-Alsobrooks compromise improved language but banks remain unsatisfied
- Conference of State Bank Supervisors urges limits on federal preemption
- Banking industry launched ad campaign opposing what it calls preferential treatment for crypto
- Community banks worry about reduced funding for mortgages, small-business loans
- Adds pressure to already tight 25-day Senate window for CLARITY Act passage
Why It Matters
The stablecoin yield debate is the most commercially significant unresolved issue in the CLARITY Act. If banks succeed in tightening the language, stablecoin issuers lose a key tool for driving adoption (rewards programs). If they fail, stablecoins could become de facto interest-bearing accounts outside the banking system. The outcome will determine whether stablecoins remain payment instruments or evolve into yield-bearing products that compete directly with bank deposits — and whether the CLARITY Act can secure the bipartisan votes needed to pass.