Eight banking groups on Monday said they want tighter limits on stablecoin rewards, keeping the ongoing banks-versus-crypto dispute alive in Congress.
- Eight U.S. banking groups are urging the Senate to tighten the Clarity Act’s stablecoin reward restrictions, arguing the latest language still leaves room for interest-like payments.
- Banks are targeting a proposed deposit-flight “circuit breaker,” saying regulators should not have to wait for substantial losses of bank deposits before intervening.
- The dispute pits banks’ concerns about deposits and lending against crypto advocates’ argument that stablecoin rewards have not been shown to cause deposit flight and that lawmakers have already addressed the issue.
A broad coalition of U.S. banking groups is urging the Senate yet again to tighten the Clarity Act’s restrictions on stablecoin interest and rewards, escalating a continued fight between the crypto industry and banks over whether companies should be able to pay rewards on stablecoins.
Eight groups, including the American Bankers Association, Bank Policy Institute and Independent Community Bankers of America (ICBA), wrote Senate Majority Leader John Thune and Democratic Leader Chuck Schumer on Monday, seeking changes to the Clarity Act ahead of the Senate’s vote on Tuesday.
The groups argued that the latest draft of the bill leaves opportunities for crypto companies to pay rewards that function like interest on bank deposits, arguing that that could encourage customers to move money away from banks and into stablecoins.
This has been an ongoing dispute between banks and the crypto industry as stablecoins have grown into a market worth hundreds of billions of dollars, with crypto leaders saying that banks are overstating the threat from stablecoin rewards and the competing nature of them with bank deposits.
Federal law already restricts stablecoin issuers from paying yield, but leaves open the possibility of offering rewards through exchanges and other intermediaries. Banks are asking Congress to draw a sharper line.
In the letter, the coalition singled out a proposed deposit-flight “circuit breaker,” which would allow regulators to intervene if stablecoins begin causing significant losses of bank deposits.
“A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all,” the groups wrote.
Treasury Secretary Scott Bessent defended that approach in a post on X, saying 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.”
Bessent framed the provision as a way to balance the administration’s support for stablecoins with protection for community banks. He said the administration wants both digital-asset technology and community banks to contribute to U.S. economic growth, pointing to last year’s GENIUS Act as an effort to ensure stablecoin infrastructure is built in the U.S.
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ICBA provided more details in a separate letter, saying the proposal would cover an 18-month period after the law takes effect and could trigger action if regulators determine transfers into payment stablecoins have caused a “substantial detrimental impact” on deposits at community banks with less than $10 billion in assets.
They also asked lawmakers to eliminate language allowing certain rewards to depend on how many stablecoins a customer holds and for how long, arguing that that can make a rewards program function like a savings account.
UPDATE (Sep 14, 18:02 UTC): Adds X post by Treasury Secretary Scott Bessent defending the bill’s deposit-flight protections for community banks.
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