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

Eight banking trade associations pressed Senate leaders to tighten the Clarity Act’s rules on stablecoin rewards, warning that current language could permit payments that resemble deposit interest and pull funds away from banks. In a letter sent after lawmakers released a revised version of the bill, the groups argued some of the bill’s exceptions create avenues for interest-like payments tied to how much customers hold or how long they hold tokens.

The letter, addressed to John Thune and Chuck Schumer, asked lawmakers to remove the word 'solely' from a restriction on payments connected with holding stablecoins and to replace the bill’s equivalence test with a 'substantially similar' standard. The trade groups also want a clause that allows otherwise permissible rewards to depend on a customer’s balance, duration or tenure deleted, saying those factors are commonly used to calculate interest.

Signatories include major and community-focused industry organizations such as the American Bankers Association, Bank Policy Institute and Independent Community Bankers of America. The groups contend that incentives resembling deposit interest could siphon funds that banks currently use to finance mortgages, farms and small businesses, and that community lenders would be particularly vulnerable. The letter does not provide estimates of potential outflows or evidence that lending has already declined as a result.

The associations also criticized a proposed deposit-flight 'circuit breaker' in the bill, saying it would only empower regulators after significant withdrawals have occurred and therefore would not prevent harm up front. The letter reiterates demands first made by six banking trade groups in May and comes as the debate over stablecoin rules has intensified in senators’ home states, with community bankers urging tighter limits and crypto supporters advocating for the ability to offer rewards and clearer federal guidance. A key Senate procedural vote on the revised Clarity Act was scheduled for Tuesday.