Monday, eight banking trade groups approached Senate leaders with a request to tighten the Clarity Act’s rules on stablecoin rewards. The groups argue that certain exceptions in the bill could permit interest-like payments that pull deposits away from banks.
The groups reached out to Senate leaders John Thune and Chuck Schumer, arguing that they could not endorse the most recent changes in the Clarity Act concerning rewards for transactions involving stablecoins—tokens generally tied to the dollar. They also asked for stricter controls on payments linked to how much customers hold or how long they hold them.
“We support this distinction in principle, although we believe that the way the current legislative text is drafted provides loopholes and avenues for the prohibition to be easily evaded that would still allow interest and interest-like payments to be made on stablecoin balances,” the group wrote.
The Letter’s Signatories
Three banking industry groups — the American Bankers Association, Bank Policy Institute and Independent Community Bankers of America — signed the letter together. They speak for both big banks and smaller community lenders. The letter arrives before a Senate vote set for Tuesday, which follows the release of a revised Clarity Act.
The legislation aims to create national guidelines for digital assets and define which regulators are responsible for overseeing them. But the coalition is pushing to strip “solely” from the provision that bars payments tied to owning stablecoins. Instead of an equivalence standard, they want to adopt a “substantially similar” test, which would extend the prohibition to cover rewards that function like interest paid on deposits.
What the Groups Want Removed
A distinct request would eliminate provisions that permit certain incentives to hinge on how long a customer has held an account or how much money they keep with the company.
The groups wrote “Given that interest payments are often calculated by reference to duration, balance and tenure, this subsection appears to contradict the initial prohibition,” putting their thoughts down together.
The argument is that these incentives could draw away funds that banks would otherwise devote to mortgages, farms, and small businesses. The letter singles out community and mission-driven lenders as especially vulnerable, though it offers neither an estimate of how much funding might be lost nor any proof that lending cuts have actually taken place.
The Circuit Breaker Objection
Instead of adopting a deposit-flight “circuit breaker,” the groups turned it down, describing it as a mechanism that lets regulators react only after significant funds have already been withdrawn.
“A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all,” the group wrote. “Congress should address this risk upfront by ensuring the Clarity Act prohibits payment stablecoin rewards and incentives that function like deposit interest, rather than waiting for harm to banks, borrowers and communities before regulators are empowered to respond.”
Related Demands From May
Six banking trade groups renewed their May demands in the letter, which included limits on rewards tied to account balances and a push for a “substantially similar” standard to be adopted.
The Spread to Senators’ Home States
The disagreement has now spilled over into senators’ home states, where community bankers are pushing for tighter restrictions while crypto supporters rally behind the bill. Crypto companies maintain that stablecoin rewards should keep being allowed and that the industry needs clearer federal rules.
Key Facts Box
- Groups: Eight banking trade groups
- Letter recipients: Senate leaders John Thune and Chuck Schumer
- Bill: Clarity Act
- Vote: Senate procedural vote scheduled for Tuesday
- May demand: Demands made by six banking trade groups in May
What We Make of It
The organizations push for stricter limits on stablecoin rewards, arguing that the present wording permits them via loopholes. They caution that interest-like payments on stablecoin balances might lure funds away from bank lending.
The letter does not report any actual losses. Instead, it cites exposure for community lenders and funding for mortgages, farms, and small businesses, but provides no figures on how much might flow out or proof that any lending has fallen.
The urgency of their demand sits oddly beside that admission. These groups warn of a risk they cannot measure, at a time when crypto backers are rallying behind the bill in senators’ home states.
Tuesday’s vote will show whether senators take the side of banks or crypto supporters. No matter how it turns out, the battle over stablecoin rewards remains unresolved.
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