Banks, CUs Remain Concerned About Stablecoin Rewards In Revised Clarity Act
By CU Today Staff —
WASHINGTON—Senate Republicans have revised the Clarity Act in an effort to protect banks and other depository institutions from losing deposits to stablecoins, but the banking industry says the legislation still does not go far enough to prevent crypto firms from offering rewards that could compete with traditional deposits, Reuters reported.
The revised cryptocurrency market-structure bill, released ahead of a critical Senate procedural vote Tuesday, would give the Treasury secretary new authority to address the risk of deposit flight tied to payment stablecoins. Republican sponsors said the provision is intended as a “circuit-breaker” to protect community financial institutions and the lending they support.
Both America's Credit Unions and the Defense Credit Union Council have shared concerns with Congress about the potential for deposit flight from CUs.
But Reuters reported the banking industry remains concerned about language that would permit crypto companies to offer certain rewards on stablecoins. Banking groups warned Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer that stablecoins offering incentives comparable to deposits or other savings products could pull money from federally insured financial institutions and reduce their ability to make loans.
“The ability of payment stablecoins ... to offer incentives similar to deposits and other store-of-value products could lead to deposit flight from our nation’s banks and thereby hinder the ability of depository institutions to extend credit to their customers,” the groups said in a letter quoted by Reuters. Banking organizations have repeatedly argued that deposits leaving community financial institutions could translate into less funding for mortgages, small-business loans and agricultural credit.
The dispute over stablecoin rewards has become one of the central issues separating the financial services and crypto industries as Congress considers a broader regulatory framework for digital assets. Reuters reported the revised Clarity Act also contains significant changes sought by Democrats, including stronger ethics restrictions on public officials profiting from cryptocurrency ventures. Republican sponsors said the latest draft incorporates 126 substantive changes requested by Democrats.
Despite those changes, Reuters reported it remained unclear whether supporters have the 60 votes needed to advance the legislation in Tuesday's procedural vote. The crypto industry has spent heavily lobbying for the Clarity Act, while banks continue pressing lawmakers for tighter restrictions on stablecoin rewards before the legislation moves forward.
Originally reported by CU Today.