Banking Industry Says Clarity Act on Stablecoin Proposal Will Enable ‘Evasion’

A coalition of the nation’s largest banking trade groups, which represents Wall Street giants and community banks alike, issued a statement Friday expressing concern that new language in a key cryptocurrency bill would benefit digital asset companies and disrupt the traditional banking industry.

For months, the banking industry and the cryptocurrency lobby have battled over key language in the Clarity Act, a bill that would formally legalize most cryptocurrency activities in the United States.

Banks want to add language to legislation that prohibits cryptocurrency companies from offering a return on stablecoins, which are cryptocurrencies pegged to the value of the US dollar. Banks say such programs could make traditional low-yield savings accounts less attractive. Cryptocurrency companies, including Coinbase, have argued that they must be able to compete with traditional finance.

Nearly four months ago, skirmish The yield on the stablecoin has prevented the Clarity Act from advancing in the Senate. Last week, two key lawmakers on the Senate Banking Committee finally unveiled a proposal bargaining On this issue, which crypto leaders quickly embraced.

Soon after, senators expressed optimism that the problem had been dealt with, and that a committee vote on the Clarity Act was within reach.

But now, a united front of major banking trade groups is demanding further changes to the proposed language, arguing that the current draft contains loopholes that would allow cryptocurrency companies to evade the intended ban on stablecoin returns.

The settlement language, drafted by Sens. Thom Tillis (R-N.C.) and Angela Albrooks (D-Md.), would prohibit the payment of rewards on stablecoins in a way that is “economically or functionally equivalent to paying interest or yield on an interest-bearing bank deposit.”

But it would also potentially greenlight rewards tied to participating in governance, validation, and staking — rewards calculated by referring to a user’s account balance.

Today, six banking trade groups, representing all major national banks and community banks in all 50 states, wrote a letter letter to the Senate Banking Committee arguing that these exceptions are excessive.

“We are concerned…that the proposed language includes exceptions that would enable evasion of the intended ban and incentivize customers to hold and grow stablecoin balances on deposits,” the groups said.

The letter includes specific questions about rewording stablecoin yield language — including triggering the ability for rewards to reference account balances in any way, and changing the prohibition on payments that are “economically or functionally equivalent” to a yield, to a prohibition on payments that are “substantially similar” to a yield.

The letter lists several potential stablecoin rewards programs that banking groups say could exist under the proposed language that would violate the spirit of the potential settlement. These include structured payments such as a money market mutual fund, fixed monthly bonus payments that increase as the account balance increases, and payments that are based on the account balance but are triggered by making a certain number of monthly transactions.

When banks first raised concerns about the new language earlier this week, Senator Tillis said He replied In a statement he said he and Sen. Albrooks “respectfully agree to disagree” — a sign that lawmakers were willing to move forward with a committee vote on the bill regardless.

Decryption She reached out to the two senators regarding the more detailed concerns raised by Today’s Banking, but did not immediately receive a response.

Time is of the essence for supporters of the Clarity Act, which senators on the Banking Committee promised would be taken up next week or the following.

The Senate has been in session for only two weeks this month and is scheduled to recess soon before the midterm elections in November. Sen. Bernie Moreno (R-Ohio), a pro-crypto member of the Senate Banking Committee, recently urge And if the bill is not passed this month, “digital asset legislation will not be passed in the foreseeable future.”