US banking groups say they are still dissatisfied with the wording of the Senate’s proposed CLARITY Act for stablecoins, particularly provisions related to stablecoin yield. In a joint statement, the American Bankers Association and several other banking organizations acknowledge that Senators Thom Tillis and Angela Alsobrooks are pursuing what they view as the correct policy goal—limiting stablecoin yield in a way that protects bank deposits—but they argue the “proposed language” currently “falls short.” The dispute is tied to Section 404, which bankers say may allow crypto platforms to provide payments-stablecoin users interest or yield in ways that could create a “loophole.” Banking groups have cited studies warning that broad stablecoin adoption could trigger large deposit outflows from the US banking system, potentially affecting community banks. They also point to an argument that deposit-driven credit effects could reduce consumer, small-business, and farm lending. White House economists, however, reported in April that banning stablecoin yield may increase bank lending by about $2.1 billion, a marginal net rise. The bill, which passed the House in July, has faced uncertainty about its timing before the November 2026 midterms. Tillis says the current text is a compromise that would prohibit rewards on idle balances while allowing other customer rewards, and he argues it supports a bipartisan path forward.
US banks say CLARITY Act stablecoin yield language falls short of protecting deposits
US banking groups say they are still dissatisfied with the wording of the Senate’s proposed CLARITY Act for stablecoins, particularly provisions related to stablecoin yield. In a joint statement, the...
- US banking groups say the CLARITY Act’s proposed stablecoin yield language “falls short” of protecting bank deposits.
- The disagreement centers on Section 404 and whether it leaves a “loophole” for crypto platforms to provide bank-like yield or interest.
- Senators Thom Tillis and Angela Alsobrooks are described as seeking a compromise that prohibits rewards on idle balances while allowing other customer rewards.
- The CLARITY Act passed the US House in July by a 294–134 vote, but the bill’s progress in the Senate remains disputed.
- Bankers cite concerns about potential deposit outflows and credit impacts, while White House economists project only a small lending effect from banning stablecoin yield.
Stablecoin Proposal Still 'Falls Short' Of Protecting Bank Deposits: US Banks Say Authored by Brayden Lindrea via CoinTelegraph,.com, 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.” 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. Tyler Durden Tue, 05/05/2026 - 12:35
3 months agoUS Senator Thom Tillis said the current text of the CLARITY Act offers a compromise for the crypto industry and banks and provides a bipartisan path for the bill’s passage.
3 months ago
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