US Banks Fight Back Against Stablecoin Yield

A coalition of 78 US banking associations — led by the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) — sent a letter to the Senate demanding tighter CLARITY Act language on rewards for holding payment stablecoins. The letter went out on July 13, ahead of a Senate hearing on July 17, Finance Magnates reports.

The bill's current text (following May's compromise between Senators Tillis and Alsobrooks) already bars paying interest for simply holding stablecoins, but permits rewards tied to user activity. Banks call that wording a loophole: in their view, issuers and platforms can structure bonuses so that, legally, they aren't interest — but economically, they're a full equivalent of it.

What banks are proposing:

• remove the word "solely" from the ban — right now the law only hits payments made solely for holding
• replace the "economically or functionally equivalent to interest" test with a stricter "substantially similar" standard
• narrow the provisions that allow platform-based rewards — banks say that's exactly where the ban could be worked around

“We remain concerned that ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits”

— Coalition of US banking associations

ABA cites its own estimates: if yield-bearing stablecoins see widespread adoption and trigger deposit flight, lending to consumers, small businesses, and agriculture could shrink by a fifth or more.

The pressure falls first on regulated issuers like Circle and Paxos, as well as offshore platforms that compete with them using exactly this kind of bonus program.

For context: the Senate Banking Committee already advanced the CLARITY Act on May 14 by a vote of 15-9, with two Democrats (Alsobrooks and Gallego) joining Republicans.

We'll see how this plays out — and whether banks actually get what they're asking for.

This piece is informational, not a recommendation to buy, sell, or hold any asset.