Major U.S. banks push back on new CLARITY Act proposal

By TheStreet Roundtable

8 days ago

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Major U.S. banking groups are pushing back against new stablecoin rules in the CLARITY Act, warning that the latest proposal does not go far enough to protect bank deposits.

In a joint statement on Monday, May 4, industry bodies including the American Bankers Association and Bank Policy Institute said the bill’s language on stablecoin yield leaves room for risks the legislation is meant to address.

“We appreciate the work by Senator Tillis and Senator Alsobrooks… however, the proposed language falls short of that goal,” the groups said.

Banks warn of deposit outflows

The debate centers on whether stablecoins, digital tokens typically pegged to the U.S. dollar, should be allowed to offer yield or rewards.

Banks argue that if stablecoins begin offering returns similar to savings accounts, customers could move deposits away from traditional banks. That, in turn, could affect lending across the economy.

"Research demonstrates that yield-earning stablecoins could reduce all consumer, small-business, and farm loans by one-fifth or more," the groups said.

They also added that "it is imperative that Congress get this right."

While the proposal aims to restrict yield on stablecoins, banking groups say the current wording leaves gaps.

One concern is that crypto platforms may still be able to offer rewards through membership programs, as long as those payments are not structured like traditional bank interest. The draft also allows rewards tied to factors such as account balances or how long users hold assets.

The banks argued that "overtly incentivizing the idle holding of payment stablecoins for extended periods of time" is a direct threat to the deposits that drive local economic activity.

According to the banking groups, such provisions could still encourage users to keep funds in stablecoins for longer periods. This will effectively recreate the same incentives the bill is trying to limit.

A growing divide between banks and crypto firms

The issue has become a key sticking point in the broader CLARITY Act, which aims to set clear rules for the U.S. crypto market.

While the banks are sounding the alarm, the crypto industry is celebrating the compromise. Coinbase, which previously walked away from the bill in January, has now signaled its full support. Faryar Shirzad, Chief Policy Officer at Coinbase, argued that the banking industry’s fears are largely unfounded.

“The final rewards text in the CLARITY Act is now public,” Shirzad posted on X.

"We’ve been clear throughout this process: much of this debate was based on imagined risks, not real evidence, nor was it based on a real understanding of how crypto actually works.”

He added that the compromise protects “the ability for Americans to earn rewards, based on real usage of crypto platforms and networks,” which he believes is critical for U.S. national security and innovation.

Bill’s future remains uncertain

The Digital Asset Market CLARITY Act is the top priority for the crypto sector, aiming to formally legalize and regulate digital assets in the U.S. While it passed the House last July with a 294 to 134 vote, the bill has stalled in the Senate due to this specific dispute.

The disagreement has slowed progress on the legislation. With the U.S. midterm elections set for November 2026, there are growing concerns that the bill may not pass in time.

For now, both sides appear willing to keep negotiating. Banking groups said they plan to submit detailed recommendations to lawmakers “in the coming days” and will continue working with Congress to balance innovation with financial stability.

At stake is how stablecoins, which are one of the fastest-growing segments of the crypto market, will fit into the traditional financial system.

Banks want to protect deposits that fund loans and economic activity. Crypto firms, meanwhile, are pushing to preserve new ways for users to earn rewards and engage with digital assets.

How lawmakers resolve that tension could shape the future of both industries in the United States.