TLDR
- ABA, ICBA and 76 state banking groups urged CLARITY Act changes.
- Banks want tighter rules on stablecoin interest, yield and rewards.
- The groups warned stablecoins could become bank deposit substitutes.
- Section 404 remains a key dispute in Senate CLARITY Act talks.
- Trump urged the Senate to pass the CLARITY Act after Lindsey Graham’s death.
U.S. banking groups urged Senate leaders to strengthen stablecoin yield provisions in the CLARITY Act, warning that unclear language could allow payment stablecoins to operate like bank deposits as President Donald Trump pushes lawmakers to pass the crypto bill.
Banking Groups Seek Stablecoin Guardrails
The American Bankers Association, the Independent Community Bankers of America and 76 state banking associations sent a joint letter to Senate leaders asking for targeted changes to Section 404 of the CLARITY Act. The groups said they support responsible innovation and a regulated digital asset market, but want clearer rules around stablecoin interest, yield and reward programs.
The associations said the current bill language still leaves questions over whether stablecoin issuers, exchanges or related firms could offer rewards that make payment stablecoins behave like deposit products. They argued that Congress has long intended payment stablecoins to serve as transaction tools rather than store-of-value products.
“At the same time, significant questions remain regarding whether the current language in Section 404 provides sufficient clarity and certainty to achieve that objective,” the groups said.
They added that ambiguities could encourage stablecoin arrangements to become substitutes for deposits, despite the stated intent of lawmakers.
The letter asked senators to clarify that stablecoin interest and yield restrictions cannot be avoided through alternative incentives. The groups also urged lawmakers to remove language they believe could allow rewards tied to stablecoin balances, holding periods or wallet tenure.
Section 404 Becomes Key Senate Dispute
The banking groups asked lawmakers to replace the bill’s “functional and economic equivalent” standard with a “substantially similar” standard. They said the change would reduce confusion and make the prohibition easier to enforce.
The associations also warned that retaining certain reward language could weaken the bill’s stated purpose.
“Removing this provision aligns with our shared objective to not incentivize the idle holding of payment stablecoins for extended periods of time,” they said.
They argued that rewards tied to the amount or duration of stablecoins held in wallets or exchanges could create incentives for users to keep funds outside the banking system. Their concern is that such products may draw deposits away from banks and reduce funds available for lending.
“Retaining this section would negate the goals of the upfront prohibition,” the associations said, referring to efforts to prevent deposit flight. They said clearer language would reduce risks for consumers, communities and financial institutions.
Trump Pushes CLARITY Act as Vote Pressure Builds
The bank letter came as Trump urged the Senate to pass the CLARITY Act in honor of late Senator Lindsey Graham, who died at 71 over the weekend. Trump said on Truth Social,
“In honor of Senator Lindsey Graham, a big supporter, the U.S. Senate should pass the Clarity Act.”
Trump also linked the bill to competition with China and artificial intelligence. “China, and many other countries, would like to take complete and total control of this major financial ‘happening,’ as well as A.I.,” he said, adding, “Don’t let China win on either subject!!!”
The CLARITY Act would create a broader U.S. crypto market structure framework and divide digital asset oversight between the SEC and CFTC. The Senate Banking Committee approved the bill in May by a 15-9 vote, with two Democrats joining Republicans.
Senate passage remains uncertain because the bill needs 60 votes to overcome a filibuster. Democrats are seeking stronger ethics rules tied to elected officials’ crypto activity, while banks are pressing for tighter stablecoin yield language.
The banking associations said they remain willing to work with policymakers on revisions. Their letter adds another point of pressure as Senate negotiators try to resolve stablecoin rewards, ethics provisions and final vote support before any floor action.
