US bank lobby presses Senate to shut stablecoin yield loophole in Clarity Act
Banking groups warn Congress that vague Clarity Act wording could let stablecoins compete with deposits, risking flight from community lenders.
A coalition of United States banking associations has written to the Senate demanding tighter language on stablecoin yield in the CLARITY Act, arguing that the bill in its current form risks turning payment stablecoins into a direct substitute for bank deposits. The joint letter, sent to Senate leadership on Monday, was reported independently by crypto.news and The Block, both of which confirmed that the industry groups are pressing lawmakers to close what they describe as a loophole before the legislation advances further.
According to both outlets, the banks’ central concern is that ambiguous drafting could allow issuers to offer returns on stablecoins that function, in practice, like interest paid on deposit accounts — without stablecoin issuers being subject to the prudential regulation, capital requirements or deposit insurance obligations that apply to licensed banks.
Deposit flight fears at community banks
The Block reported that the signatories specifically flagged the risk of deposit flight from smaller, community-focused lenders, which rely more heavily on retail deposits for funding than large money-centre banks. If depositors were to shift meaningful sums into yield-bearing stablecoins, the groups argue, community banks could see their funding base erode, with knock-on effects for local lending capacity.
This is not a new anxiety for the US banking sector. Lobby groups raised similar warnings during earlier stages of federal stablecoin legislation, but the letter marks a fresh intervention timed to a critical point in the CLARITY Act’s passage through the Senate, where the bill’s market-structure provisions have already faced delay.
A bill already under strain
The CLARITY Act, the House-passed market-structure framework intended to divide oversight of digital assets between the Securities and Exchange Commission and the Commodity Futures Trading Commission, has faced a difficult path through the Senate. PoundToken has previously reported that Senate Democrats have demanded ethics clauses before backing the bill, and that a key White House crypto official’s temporary absence has added further scheduling risk to the timetable.
The banking groups’ letter adds a further complication, effectively asking legislators to reopen and tighten provisions rather than simply resolve outstanding partisan disputes. Whether the Senate accommodates the request without delaying the bill further remains to be seen.
Why it matters for European regulators
For UK and EU observers, the dispute echoes a debate that regulators on this side of the Atlantic have already largely settled. The Markets in Crypto-Assets Regulation explicitly bars issuers of e-money tokens and asset-referenced tokens from paying interest to holders, precisely to prevent stablecoins from competing with insured bank deposits. US lawmakers are now grappling with the same tension after the fact, having passed federal stablecoin legislation without fully closing that gap.
The outcome will matter to European banks and payment firms watching how Washington calibrates competition between stablecoins and deposits, given the increasingly cross-border nature of dollar-denominated stablecoin flows and their potential to draw liquidity away from traditional banking channels on both sides of the Atlantic.
Read more: US crypto market-structure bill stalls as Senate Democrats demand ethics clauses
