US banking groups have urged the Senate to tighten return rules for stablecoins under the CLARITY Act, warning that unclear language could encourage payment stablecoins to compete with traditional bank deposits.
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- US banking groups have urged the Senate to tighten return rules on stablecoins under the CLARITY Act ahead of the vote.
- The associations warned that unclear reward provisions could encourage users to move deposits from community banks to stablecoins for payment.
- Stablecoin rewards remain one of several unresolved issues as Senate negotiators work to finalize the CLARITY Act.
According to A Joint message Sent Monday to Senate Majority Leader John Thune and Minority Leader Charles Schumer, the American Bankers Association (ABA), Independent Bankers of America (ICBA) and 76 state banking associations asked lawmakers to review Section 404 of the Digital Asset Market Clarity Act before the bill reaches the Senate floor.
Banking groups said the current wording does not provide enough certainty to prevent stablecoin payments from offering interest-like incentives on deposits. While Section 404 prohibits direct or indirect interest or return on payment stablecoins, it still allows activity- or transaction-based rewards.
In the letter, the associations said important questions remain about whether the current language can fully achieve Congress’ goal. They argued that reward structures associated with holding stablecoins could encourage users to hold balances for longer periods rather than just using tokens for payments.
Banking groups are seeking stronger restrictions on incentives for stablecoins
The organizations also warned that community bank deposits support mortgage lending, small business financing, agricultural credit, and other relationship banking. According to the letter, allowing stablecoin issuers to offer yield-like incentives could reduce the deposits that local lenders rely on to fund those activities.
The groups urged senators to strengthen the ban on interest-like rewards and remove language they believe creates uncertainty about incentives tied to stablecoin balances or the length of time customers hold them. They wrote that removing this provision would support the common goal of preventing stablecoins from being held primarily for yield rather than payments.
The latest request adds another unresolved issue as senators continue to negotiate the market structure bill before the chamber’s scheduled August recess. Previous reports have shown that stablecoin rewards remain one of the main disagreements between banking institutions and the cryptocurrency industry during negotiations.
Senate negotiations continue with increasing support and amendments
Meanwhile, other organizations continued to pressure lawmakers to make changes to various parts of the legislation. Ditto I mentionedThe Federal Law Enforcement Officers Association (FLEOA) supported the House version of the CLARITY Act while asking the Senate to review provisions covering decentralized finance, investigative authority, anti-money laundering rules, and sanctions enforcement.
FLEOA also urged lawmakers to prevent companies from avoiding regulation by offering regulated services as decentralized and asked the Senate to replace the bill’s “specific intent” standard with the existing knowledge standard.
Another unresolved issue is whether the Senate should include ethics restrictions limiting how presidents, vice presidents, members of Congress and other federal officials can profit from digital assets while in office. These discussions continue along with work to reconcile the Banking and Agriculture Committee’s versions of the legislation ahead of the vote.
Separately, White House cryptocurrency adviser Patrick Witt, who has coordinated negotiations between the administration, lawmakers, banks, cryptocurrency companies and law enforcement groups, is expected to… Begin military legal training Later this month. As previously reported, Deputy Director Harry Jung is expected to take over Witt’s responsibilities during the recess while Senate negotiations continue.
The CLARITY Act is now on the Senate calendar awaiting consideration. If senators approve the measure, the House must also approve the final version before sending it to President Donald Trump for his signature.
