Banks Want More: Trade Groups Demand Stricter Stablecoin Limits in Clarity Act

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 rewards restrictions, arguing that exceptions in the bill could allow interest-like payments that draw deposits away from banks.

In their letter to Senate leaders John Thune and Chuck Schumer, the group said it could not support the latest revisions in the Clarity Act regarding rewards for transactions involving stablecoins—tokens typically pegged to the dollar—and sought tighter restrictions on payments tied to how much customers hold or how long they hold them.

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“We support this distinction in principle, although we believe that the way the current legislative text is drafted provides loopholes and avenues for the prohibition to be easily evaded that would still allow interest and interest-like payments to be made 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 comes ahead of 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 group wants to remove “solely” from a restriction on payments connected with holding stablecoins. They also seek to replace an equivalence standard with a “substantially similar” test, broadening the restriction to capture incentives that resemble deposit interest.