Banking Trade Groups Demand Stricter Stablecoin Reward Limits in Senate Clarity Act Debate

In brief

• Eight banking trade groups asked Senate leaders to tighten restrictions on stablecoin rewards.
• They want to delete language allowing rewards tied to balances, duration, or tenure.
• The groups say a proposed deposit‑flight safeguard would take effect too late.

Eight banking trade groups urged Senate leaders Monday to tighten the Clarity Act’s stablecoin‑reward restrictions, arguing that exceptions in the bill could allow interest‑like payments that draw deposits away from banks.

In a letter to Senate leaders John Thune and Chuck Schumer, the organizations said they could not support the latest revisions to the Clarity Act regarding rewards for stablecoin transactions. They seek tighter restrictions on payments linked to how much customers hold or how long they hold them.

“We support this distinction in principle, although we believe that the current legislative text provides loopholes that could allow interest‑like payments on stablecoin balances,” the group wrote.

Signatories include the American Bankers Association, Bank Policy Institute, and Independent Community Bankers of America, representing large banks and community lenders. The letter precedes a key Senate procedural vote scheduled for Tuesday, following the release of a revised Clarity Act.

While the bill would establish federal rules for digital assets and clarify regulators’ responsibilities, the banking groups want to remove the word “solely” from a restriction on payments linked to holding stablecoins. They also seek to replace an “equivalence” standard with a “substantially similar” test, broadening the prohibition to capture incentives that resemble deposit interest.

A separate request would delete language allowing otherwise permissible rewards to depend on a customer’s balance, duration, or tenure. “Given that interest payments are often calculated by reference to duration, balance, and tenure, this subsection appears to contradict the initial prohibition,” the groups wrote.

Bankers argue that such incentives could attract funds that would otherwise be used to finance mortgages, farms, and small‑business loans. The letter notes that community and mission‑driven lenders could be especially exposed, though it provides no estimate of potential outflows.

The organizations also rejected a proposed deposit‑flight “circuit breaker,” describing it as a reactive measure that would allow substantial outflows before regulators could intervene. “A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all,” they wrote. “Congress should address this risk upfront by ensuring the Clarity Act prohibits payment‑stablecoin rewards that function like deposit interest.”

The letter reiterates demands made by six banking trade groups in May, including restrictions on rewards tied to account balances and the adoption of a “substantially similar” standard.

The dispute has spread to senators’ home states, where community bankers push for tighter rules while crypto advocates rally support for the legislation. Crypto firms argue that stablecoin rewards should remain available and that clearer federal guidance is needed.

Source link