Banking Groups Urge Senate to Tighten Stablecoin Rewards in Clarity Act Ahead of Vote
Banks Push for Stablecoin Reward Limits Ahead of Senate Vote
Eight U.S. banking groups sent a letter to Senate leaders on Monday urging tighter restrictions on stablecoin rewards in the Clarity Act. Stablecoins are digital currencies designed to maintain a stable value, often pegged to the U.S. dollar. The groups argue that the current bill language allows payments that resemble interest on bank deposits and could lead to customers moving money out of traditional banks.
Key Concerns from Banking Groups
- The banks claim the latest draft of the Clarity Act leaves room for stablecoin rewards that function like interest, which could encourage deposit flight.
- They specifically target a proposed "circuit breaker" that would allow regulators to intervene only after significant deposit flight has already occurred.
- The coalition includes the American Bankers Association, Bank Policy Institute, and Independent Community Bankers of America (ICBA), among others.
Treasury Secretary Defends Bill's Protections
Treasury Secretary Scott Bessent defended the circuit breaker approach in a post on X. He said the final draft gives the Treasury secretary additional authority to respond if stablecoins begin hurting community banks. "If stablecoins cause harm to community banks, I will not hesitate to use these tools to ensure they remain fully protected," Bessent wrote, while calling the Clarity Act "essential to ensuring America wins the global race for new technology."
Confirmed Details from the Letter
The letter was sent to Senate Majority Leader John Thune and Democratic Leader Chuck Schumer. The Independent Community Bankers of America provided more details, stating that the circuit breaker proposal would cover an 18-month period after the law takes effect. It could be triggered if regulators determine transfers into stablecoins cause a "substantial detrimental impact" on deposits at community banks with less than $10 billion in assets.
Banks also asked lawmakers to eliminate language allowing certain rewards to depend on how many stablecoins a customer holds and for how long, arguing that such structure can make a rewards program function like a savings account.
Ongoing Banks vs. Crypto Debate
The banks argue that stablecoin rewards threaten bank deposits, while crypto advocates say the threat is overstated and that rewards have not been shown to cause deposit flight. This dispute has been ongoing as stablecoins have grown into a market worth hundreds of billions of dollars.
Why Stablecoin Rewards Are a Flashpoint
Stablecoin rewards programs compete directly with traditional bank savings accounts, potentially affecting how customers hold and use money. The Clarity Act aims to regulate stablecoins, and how it handles rewards could influence the balance between innovation in crypto and stability in the banking system.
Senate Vote Scheduled for Tuesday
The Senate is set to vote on the Clarity Act on Tuesday, following the banking groups' letter and the ongoing debate.
