The American Bankers Association along with the Independent Community Bankers of America and 76 state banking associations expressed concerns to Senate leaders about certain aspects of the Clarity Act.
In a letter to Senate Majority Leader John Thune (R-SD) and Minority Leader Charles Schumer (D-NY), the groups are urging the Senate to make targeted changes to the Clarity Act to provide greater certainty that payment stablecoins cannot function as substitutes for bank deposits.
While the associations expressed support for responsible innovation and a well-regulated digital asset marketplace, they called out the need for clear and enforceable guardrails around stablecoin interest, yield and reward programs.
“At the same time, significant questions remain regarding whether the current language in Section 404 provides sufficient clarity and certainty to achieve that objective,” the associations wrote in the letter. “In particular, we remain concerned that ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress’s longstanding and clearly stated intent that payment stablecoins should serve as transaction tools rather than store-of-value products.”
The associations warned that deposit flight could have significant consequences for community financial institutions. Deposits held by community banks help support mortgage lending, small-business financing, agricultural credit and other forms of relationship banking.
They stressed that “ensuring that stablecoin regulations draw clear and enforceable boundaries around interest- and yield-like incentives is therefore essential to preserving the flow of credit that local communities depend upon.”
The associations are asking for targeted revisions to Section 404 that would clarify the prohibition on interest and yield and help ensure that the prohibition cannot be circumvented through alternative incentive structures. Further, they urge lawmakers to replace the bill’s “functional and economic equivalent” standard with a “substantially similar” standard, among other changes.
“Removing this provision aligns with our shared objective to not incentivize the idle holding of payment stablecoins for extended periods of time,” the associations wrote. “Retaining this section would negate the goals of the upfront prohibition (to deter deposit flight) while tying rewards directly to how much and for how long customers hold payment stablecoins in wallets or exchanges.”
The groups said that clarifying these provisions would help establish durable rules, support responsible innovation, and provide the clearest path to achieving Congress’s stated objective while reducing the risk of unintended consequences.