CLARITY Act: Banks Split as Stablecoin Yield Fight Intensifies Now

• Banking sector divided, with large retail banks opposing stablecoin yield compromise while others show support.
• Critics warn draft leaves loopholes, allowing reward structures that may still mimic interest on holdings.
• Banks ramp up lobbying before Senate markup, signaling ongoing tension despite lawmakers claiming consensus.

Banks are breaking ranks over stablecoin yield rules in the CLARITY Act, as divisions continue ahead of a Senate Banking Committee markup. According to journalist Eleanor Terrett, large consumer-facing banks oppose the compromise, while others show support. The dispute centers on whether the proposal adequately prevents deposit flight and closes reward-based loopholes.

Bank Divide Deepens Over Stablecoin Yield Compromise

The disagreement has exposed clear fault lines across the banking sector. According to Eleanor Terrett, large banks with retail exposure remain dissatisfied with the current draft language. However, institutions without consumer-facing operations appear more comfortable with the proposal.

Some community banks have also shown support, though their main representative body disagrees. The Independent Community Bankers of America continues to raise concerns in Washington. This split now shapes how the broader industry approaches the upcoming legislative process.

Language Concerns Drive Industry Pushback

At the core, banks argue the draft language remains too narrow. According to Terrett, critics believe it leaves room for crypto firms to bypass restrictions. They argue the compromise does not eliminate yield but changes how companies structure rewards.

Banking associations reinforced this concern in a joint statement issued May 4. Groups including the American Bankers Association and Bank Policy Institute said the proposal “falls short.” They stressed it fails to fully prohibit yield and interest on stablecoins.

Moreover, they warned that rewards tied to balance or duration could still encourage idle holdings. That structure, they said, risks undermining efforts to prevent deposit migration from traditional banks.

Lobbying Efforts Shift Ahead of Markup

With tensions unresolved, banks are expanding their outreach strategy. According to Terrett, trade groups now plan to engage more Senate Banking Committee members. This effort goes beyond initial talks with Senators Thom Tillis and Angela Alsobrooks.

Notably, lead negotiators indicated the issue was settled in a recent joint statement. However, industry reactions suggest otherwise as feedback continues to emerge. As discussions advance, the divide within banking circles remains a central factor shaping the bill’s path.

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