America’s largest banking groups have expressed continued dissatisfaction with the CLARITY Act’s proposed stablecoin yield provisions, arguing the legislation fails to adequately protect traditional bank deposits from crypto competition.
In a joint statement released Monday, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America acknowledged that US Senators Thom Tillis and Angela Alsobrooks are “seeking to achieve the correct policy goal” in prohibiting stablecoin yield. However, they warned that the current “proposed language” of the CLARITY Act “falls short of that goal.”
“It is imperative that Congress get this right,” the banking coalition stated, signaling their intent to submit detailed recommendations to lawmakers in the coming days.
The dispute over stablecoin yield has become a major sticking point threatening to derail the bipartisan cryptocurrency legislation, which previously passed the House of Representatives in July by a 294-134 vote. With the US midterm elections scheduled for November 2026, there are growing concerns that the CLARITY Act may not be enacted before the political calendar complicates its passage.
Banking groups have consistently raised alarm about potential mass outflows from the traditional banking system if stablecoins gain widespread adoption. They have cited studies suggesting that trillions of dollars could flow out of US banks, with community banks particularly vulnerable due to limited balance-sheet flexibility to absorb such losses without resorting to more expensive wholesale borrowing.
In their Monday statement, the bankers referenced analysis by Stanford-trained economist Andrew Nigrinis, arguing that stablecoin yields driving bank deposit outflows “could reduce all consumer, small-business, and farm loans by one-fifth or more, making it essential for the prohibition to be clear and transparent.”
However, White House economists presented a starkly different assessment in April, reporting that banning stablecoin yield may increase bank lending by only $2.1 billion. This figure represents a marginal net increase of approximately 0.02%, suggesting far less dramatic impacts than banking industry projections.
The banking coalition specifically contested the language of Section 404 of the CLARITY Act, which addresses the prohibition of interest and yield on payment stablecoins. They argued that the current wording allows crypto platforms to pay users bank-like interest or yield while operating outside traditional banking regulations.
“This is a significant loophole that must be addressed,” the bankers stated, promising to share detailed suggestions for strengthening the proposed language with lawmakers in the coming days.
Senator Tillis defended the current text of the legislation, characterizing it as a carefully crafted compromise that balances competing interests. He said the CLARITY Act strikes a balance by prohibiting stablecoin rewards on idle balances while allowing crypto platforms to “offer other forms of customer rewards.”
“Most importantly, it helps put us on a bipartisan path to pass the CLARITY Act, providing the regulatory certainty needed to foster innovation,” Tillis stated. He added pointedly, “Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree.”
The current text of the CLARITY Act was made public on Friday, with major crypto industry players including Coinbase advocating for a Senate markup to be scheduled for next week. The crypto industry has been pushing for swift passage of comprehensive stablecoin legislation to provide regulatory clarity for digital asset issuers and platforms.
The outcome of this legislative battle could have far-reaching implications for both the crypto industry and traditional banking sector, potentially reshaping how digital assets compete with conventional financial products for consumer deposits and determining the competitive landscape for payment systems in the United States.
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