Major U.S. banking organizations are calling on the Senate to strengthen parts of the CLARITY Act, warning that the bill’s current language could allow stablecoin issuers to offer rewards that resemble interest-bearing bank accounts.
The banking industry argues that unless lawmakers tighten the legislation before a Senate vote, payment stablecoins could begin competing directly with traditional bank deposits, potentially affecting community banks and the broader financial system.
Banking groups raise concerns over stablecoin rewards
In a joint letter sent to Senate Majority Leader John Thune and Minority Leader Chuck Schumer, the American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), and 76 state banking associations urged lawmakers to revise Section 404 of the Digital Asset Market CLARITY Act.
The organizations believe the current wording leaves too much room for stablecoin issuers to introduce reward programs that function similarly to interest payments.
Although the bill explicitly prohibits payment stablecoins from paying direct or indirect interest, it still allows activity-based and transaction-based rewards. Banking groups argue that these exceptions create uncertainty and could unintentionally encourage users to hold stablecoins for financial returns instead of using them strictly as payment tools.
Banks warn deposits could shift to stablecoins
The banking industry says community banks depend heavily on customer deposits to provide essential financial services.
According to the letter, deposits help fund mortgage lending, small business financing, agricultural loans, and other local banking activities that support regional economies.
If stablecoin issuers are allowed to offer reward structures tied to holding digital assets, consumers may move money away from traditional savings accounts into payment stablecoins.
The banking associations argue that this shift could reduce available deposits for community lenders and weaken their ability to finance local businesses and households.
To address the issue, the groups are asking senators to remove language they believe allows yield-like incentives and strengthen restrictions on rewards connected to stablecoin balances or holding periods.
Senate continues negotiating the CLARITY Act
The debate over stablecoin rewards is only one of several unresolved issues as lawmakers work to finalize the CLARITY Act before Congress begins its August recess.
Various organizations have proposed additional amendments to the legislation in recent weeks.
The Federal Law Enforcement Officers Association (FLEOA) has already urged the Senate to revise sections covering decentralized finance, anti-money laundering rules, sanctions enforcement, and investigative authority. The organization also wants lawmakers to close potential loopholes that could allow centralized companies to present themselves as decentralized platforms to avoid regulation.
Ethics provisions remain under discussion
Another topic still being debated is whether the final version of the CLARITY Act should include ethics rules preventing presidents, members of Congress, and other senior government officials from personally benefiting from digital asset investments while serving in office.
Senators continue negotiating both the Banking Committee and Agriculture Committee versions of the legislation before bringing the bill to a full Senate vote.
Meanwhile, White House crypto adviser Patrick Witt, who has helped coordinate discussions between lawmakers, regulators, banks, and crypto industry representatives, is expected to begin military legal training later this month. During his absence, deputy director Harry Jung is expected to oversee the administration’s involvement in the negotiations.
Final approval still requires House support
The CLARITY Act is currently awaiting consideration on the Senate floor.
If approved, the final version must also pass the House of Representatives before it can be sent to President Donald Trump for signature.
With stablecoin regulation becoming one of the most debated aspects of the bill, lawmakers are expected to continue refining the legislation as both the banking industry and crypto sector push for changes before the final vote.
