WASHINGTON — A coalition of major banking trade groups is raising concerns about proposed stablecoin provisions in the pending Clarity Act, saying draft language aimed at restricting yield payments on digital assets does not go far enough to protect the traditional deposit system.
In a joint statement, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America said they support efforts by Sens. Thom Tillis and Angela Alsobrooks to address risks tied to stablecoin yields, but argued the current proposal leaves significant gaps.
The CU Daily had coverage of the Clarity Act compromise here.
“We appreciate the work by Senator Tillis and Senator Alsobrooks to address the concerns from banks of all sizes around the risk of deposit flight from paying yield on stablecoins,” the groups said. “However, the proposed language falls short of that goal. It is imperative that Congress get this right.”
Warning Issued
The organizations again warned that allowing yield-bearing stablecoin structures could draw funds away from banks, potentially reducing lending to consumers, small businesses and farms. Citing research, the groups said such activity could cut those loans by “one-fifth or more.”
The statement emphasized that while lawmakers are pursuing the “correct policy goal” of prohibiting interest or yield on stablecoins, the draft language could allow workarounds that undermine that objective.
Among the concerns cited is a provision that would permit cryptocurrency exchanges and other intermediaries to offer rewards or payments tied to membership programs, provided those payments are not structured like traditional bank interest. The groups described that as a “significant loophole” that could enable yield-like returns in practice.
Bad Incentives Alleged
They also pointed to language allowing rewards to be calculated based on factors such as duration, balance and tenure, arguing that such incentives would effectively encourage users to hold stablecoins for longer periods and in larger amounts — the very behavior the prohibition is intended to prevent.
The banking groups said they plan to provide detailed recommendations to lawmakers in the coming days and will continue working with Congress “to help embrace innovation while protecting the deposits that drive local lending and economic activity.”
