US Banks Say Stablecoin Bill Still Fails Deposit Safeguards

TLDR

• US banking groups said the CLARITY Act stablecoin language does not fully protect bank deposits.
• The House passed the bill with a 294 to 134 vote, but Senate action has stalled.
• Bankers warned that stablecoin yield could drive large deposit outflows from community banks.
• White House economists said banning stablecoin yield may increase lending by only $2.1 billion, or 0.02%.
• Banking groups argued that Section 404 leaves a loophole for crypto platforms to offer rewards.

Major US banking groups said the CLARITY Act does not adequately protect bank deposits from stablecoin yield risks. They urged lawmakers to revise the bill’s language before moving forward. The dispute centers on whether the proposal clearly bans interest-like rewards on payment stablecoins.

Banking Groups Challenge Stablecoin Yield Language

The American Bankers Association led a joint statement with several national banking organizations. The Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America joined the statement. They said the proposed language fails to block yield features that resemble deposit interest.

The groups addressed Senators Thom Tillis and Angela Alsobrooks directly. They said lawmakers are “seeking to achieve the correct policy goal” by prohibiting stablecoin yield. However, they added that the current draft “falls short of that goal.”

They stressed that Congress must finalize clear restrictions. “Congress must get this right,” the groups said. They warned that unclear language could weaken deposit protections.

The House of Representatives passed the CLARITY Act in July by a 294-134 vote. However, Senate action has stalled over disagreements on stablecoin yield. Lawmakers now face pressure before the November 2026 midterm elections.

Banking groups have cited research on potential deposit outflows. They argued that widespread stablecoin adoption could shift trillions from US banks. Community banks could face funding stress and higher wholesale borrowing costs.

They also cited economist Andrew Nigrini to support their concerns. They said stablecoin yields could reduce consumer, small-business, and farm loans by one-fifth. They argued that this risk makes a clear prohibition necessary.

White House economists offered a different assessment in April. They reported that banning stablecoin yield could increase bank lending by $2.1 billion. They said this change equals about 0.02% in net lending growth.

Section 404 Dispute and Senate Path Forward

Banking groups focused on Section 404 of the bill. The section addresses interest and yield on payment stablecoins. They argued that its wording leaves room for alternative reward structures.

They said crypto platforms could still offer bank-like returns. They warned that firms might structure rewards outside traditional banking rules. They called this a “loophole” that lawmakers must close.

The groups said they will share detailed revisions with lawmakers soon. They want clearer language that blocks yield payments on idle stablecoin balances. They said this step would align the bill with its stated goal.

Senator Tillis defended the compromise language. He said the draft bans rewards on idle balances. However, he said it allows crypto platforms to offer other customer incentives.

He said the text supports bipartisan progress in the Senate. He stated that the measure aims to provide regulatory certainty. He acknowledged disagreement with parts of the banking industry.

The updated CLARITY Act text became public on Friday. Coinbase and other crypto firms have pushed for a Senate markup next week. Lawmakers have not announced a final vote schedule.

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