Written by Brayden Lindrea, Staff Writer. Reviewed by Felix Ng, Staff Editor.
Written by Brayden Lindrea, Staff Writer.
Reviewed by Felix Ng, Staff Editor.
Stablecoin proposal still ‘falls short’ of protecting bank deposits: US banks
Latest NewsPublishedMay 5, 2026
US Senator Thom Tillis stated the current text of the CLARITY Act offers a compromise for the crypto industry and banks and provides a bipartisan path for the bill’s passage.
America’s largest banking groups stated they remain dissatisfied with the CLARITY Act’s newly proposed language on stablecoin yield, arguing that it fails to protect bank deposits.
In a statement Monday, the bankers acknowledged that US Senators Thom Tillis and Angela Alsobrooks are “seeking to achieve the correct policy goal” in prohibiting stablecoin yield but pointed out that the CLARITY Act’s “proposed language” currently “falls short of that goal.”
“It is imperative that Congress get this right,” the American Bankers Association stated in a joint statement with the Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America.
The dispute between bankers and the crypto industry over stablecoin yield has stalled the bipartisan bill, which passed the House of Representatives in July by a 294-134 vote. There are concerns that the CLARITY Act may not pass before the US midterm elections in November 2026, which could further hinder its progress.
Banking groups have previously cited studies suggesting that widespread stablecoin adoption could lead to trillions in outflows from the US banking system, particularly from community banks, which may not have enough balance-sheet flexibility to absorb these outflows without resorting to higher-cost wholesale borrowing.
In the Monday statement, the bankers also cited an article by Stanford-trained economist Andrew Nigrinis to argue 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.”
nevertheless, White House economists reported in April that banning stablecoin yield may rise bank lending by only $2.1 billion, a marginal net rise of about 0.02%.
Bankers want “loophole” closed
The bankers contested the language of Section 404, arguing that it allows crypto platforms to pay users bank-like interest or yield outside traditional rules.
Extract of the “SEC 404. Prohibiting interest and yield on payment stablecoins” document. Source: Alex Thorn
“This is a notable loophole that must be addressed,” the bankers stated, adding that they will be sharing “detailed suggestions for strengthening the proposed language with lawmakers in the coming days.”
Related: Lummis says CLARITY Act offers ‘strongest’ developer protections
nevertheless, Tillis stated the current text of the CLARITY Act strikes a compromise 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. 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 Coinbase and other members of the crypto industry pushing for a Senate markup next week.
Magazine: Will the CLARITY Act be good — or bad — for DeFi?
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