US banking trade groups are pushing for significant revisions to the CLARITY Act’s regulation of stablecoin yields, urging an absolute prohibition on passive, deposit-like interest payments. Their proposal comes just before a crucial markup session in the Senate committee overseeing the legislation. The groups argue that current language still allows loopholes that could enable stablecoin reward programs to mimic traditional interest-bearing deposits, potentially drawing funds away from conventional banks.
The CLARITY Act, designed to regulate cryptocurrency in the US, intends to ban all forms of passive yield on stablecoins to avoid direct competition with bank savings accounts. However, the bill permits yield earned through active engagement, such as staking, transaction-related rewards, or liquidity provision. This approach encourages users to actively utilize stablecoins rather than simply holding them to earn interest. Banking groups are concerned some provisions in the Act are ambiguous enough to undermine the ban on passive returns, enabling stablecoins to offer near-equivalent financial incentives.
Leading associations, including the American Banking Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, Independent Community Bankers of America, and National Bankers Association, submitted a joint letter recommending key textual changes. Most notably, they propose replacing the phrase “functional and economic equivalent” with “substantially similar” in defining prohibited yield to tighten enforcement. They also urge the removal of a subsection they view as ambiguous and counterproductive to the bill’s intent.
Despite these efforts, insiders suggest lawmakers have deprioritized the stablecoin yield debate to focus on broader elements of the CLARITY Act. An aide to the Senate Committee on Banking, Housing, and Urban Affairs described the banking groups’ amendments as modest and unlikely to attract significant legislative support in the upcoming markup scheduled for mid-May.
This markup session will involve reviewing the bill’s full text, considering amendments like those proposed by the banking groups, and voting on whether to advance the CLARITY Act toward final passage. The outcome will shape how stablecoins are integrated into the financial system, balancing industry innovation with traditional banking protections.