Banks Push Senate To Tighten Stablecoin Bill, Warn Of Deposit Flight Risk
By CU Today Staff —
WASHINGTON—The American Bankers Association, the Independent Community Bankers of America and 76 state banking associations are urging Senate leaders to revise the Clarity Act, warning that the legislation could allow payment stablecoins to function as substitutes for bank deposits if key provisions are not strengthened.
In a letter to Senate Majority Leader John Thune and Minority Leader Charles Schumer, the groups said they support responsible innovation and a well-regulated digital asset market, but argued Section 404 of the bill does not provide sufficient certainty that stablecoins will remain payment tools rather than store-of-value products. They said ambiguities in the language could encourage arrangements that effectively compete with traditional bank deposits.
The organizations warned that deposit migration to stablecoins could reduce funding for community banks, affecting mortgage lending, small-business financing, agricultural credit and other relationship-based lending that supports local economies. They said stronger guardrails around stablecoin interest, yield and reward programs are needed to preserve the flow of credit to communities.
The groups urged senators to revise the bill by clarifying the prohibition on interest- and yield-like incentives, replacing the bill's "functional and economic equivalent" standard with a "substantially similar" standard, and removing language they believe could allow rewards tied to stablecoin balances or holding periods. They said the changes would reduce the risk of deposit flight while providing clearer rules for responsible stablecoin innovation.
Originally reported by CU Today.