The American Bankers Association, among other financial trade associations, are urging Senate Banking Committee leaders to make technical refinements to the stablecoin bill, the CLARITY Act.
Specifically, the groups are urging changes to the proposed payment stablecoin yield language in the CLARITY Act. Specifically, they are urging targeted revisions to clarify the prohibition on interest and yield, eliminate provisions that could be used to circumvent congressional intent, and better align the bill’s text with the goal of protecting consumers and financial stability.
They warn that allowing interest-like yield on stablecoins could weaken bank deposits and reduce credit available to consumers, small businesses and farmers.
“Our concern is that payment stablecoin yield, or incentives that act like yield, can reduce U.S. deposits and, in turn, banks’ capacity to extend credit across the country,” the groups wrote in a letter to committee chair Sen. Tim Scott (R-SC) and ranking member Sen. Elizabeth Warren (D-MA).
The letter was signed by the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, Independent Community Bankers of America, and National Bankers Association.
The letter emphasizes that deposits play an important role in supporting lending and economic growth nationwide, and ambiguities in the current language could incentivize customers to shift funds out of the banking system.
“Research indicates that deposit flight driven by the widespread adoption of yield-bearing stablecoins could reduce consumer, small business, and agricultural lending by one-fifth or more, highlighting the stakes involved in ensuring that the statutory framework is both precise and robust,” the groups wrote.
The associations said they appreciated efforts by Sens. Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) to improve parts of the bill. However, they noted that additional changes are needed to ensure the bill prohibits interest-like payments on stablecoins and avoids unintended loopholes.
“Our goal in offering these recommendations, which we believe are consistent with Senator Tillis and Senator Alsobrooks’ critical policy goal of stopping deposit flight, is to ensure any final legislation signed into law ushers in a new financial market designed to fully accommodate digital assets and blockchain technologies, while also protecting the economic resilience of America’s consumers, small businesses, and communities,” the letter concluded.
The groups are committed to working with the Administration, Congress, regulators and other stakeholders to advance responsible innovation while safeguarding the strength of the U.S. financial system.