Banks Tell Senate: Stablecoins Shouldn't Pay Rent in Deposit Country 🏦

The American Bankers Association, the Independent Community Bankers of America and 76 state banking associations sent a joint letter to Senate leaders urging amendments to the stablecoin yield provisions of the Digital Asset Market Clarity Act (CLARITY), warning that current language could allow payment stablecoins to function as deposit substitutes rather than pure transaction tools. The banking groups expressed support for the broader bill but said ambiguities "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," according to a Monday press release. The letter urged lawmakers to revise section 404 to "clarify the prohibition on interest and yield and help ensure that the prohibition cannot be circumvented through alternative incentive structures," citing risks of a "deposit flight."

The pushback comes ahead of a scheduled House of Representatives hearing on July 17 and follows the CLARITY Act's clearance of the Senate Banking Committee in May. Democrats and the banking industry have argued that the bill would allow crypto firms to offer yields on stablecoins without facing the same requirements as traditional banks. In a May interview, JPMorgan CEO Jamie Dimon said 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.

Senator Thom Tillis has separately proposed adding "circuit-breaker" language to the CLARITY Act that would enable bank regulators including the FDIC and OCC to intervene if they observe systemwide deposit flight to crypto, according to a Punchbowl report. Tillis and Senator Angela Alsobrooks previously led negotiations between the banking and crypto industries that produced a compromise on the issue. Another CLARITY Act draft is expected to be released within days.

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. The bill seeks to establish the first regulatory framework for digital assets in the US. Separately, 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.