Banks to Stablecoins: Your Yield Is Our Problem 🏦

The American Bankers Association, the Independent Community Bankers of America and 76 state banking associations sent a joint letter to US Senate leaders urging amendments to the stablecoin yield provisions of the Digital Asset Market Clarity Act (CLARITY), according to a press release published on Monday. The banking groups expressed support for the broader bill while warning that current language on stablecoin interest, yield and rewards is too ambiguous and could allow payment stablecoins to function as deposit substitutes rather than transaction tools. The letter stated that ambiguities within the bill "could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress's longstanding and clearly stated intent that payment stablecoins should serve as transaction tools rather than store-of-value products."

The associations urged lawmakers to revise section 404 to clarify the prohibition on interest and yield and ensure that the prohibition cannot be circumvented through alternative incentive structures, citing the risk of a "deposit flight" from traditional banks. The pushback comes days ahead of the bill's scheduled House of Representatives hearing on July 17, and follows earlier concerns from Democrats who argued during Senate Banking Committee markup in May that the legislation would allow crypto firms to offer yields on stablecoins without facing the same requirements as traditional banks. JPMorgan CEO Jamie Dimon said in a May interview that the banking industry would continue to "fight" against the current version of the CLARITY Act and that crypto companies wanting to pay yield on stablecoins should apply for banking charters.

The bill aims to establish the first regulatory framework for digital assets in the US. Galaxy Digital cut its odds of the CLARITY Act becoming law in 2026 to 50% on June 26, citing the lack of a unified Senate Banking-Agriculture text, no firm floor schedule and a narrowing legislative window before lawmakers leave Washington for recess. Meanwhile, the CLARITY Act secured its second public endorsement from a major US law enforcement organization on July 10, when the Federal Law Enforcement Officers Association (FLEOA) said it submitted a letter in support of the legislation