Banking Industry Challenges Stablecoin Yield Language in CLARITY Act
The American Bankers Association alongside state banking groups issued a collaborative letter demanding greater clarity regarding stablecoin yield provisions in the CLARITY Act, prior to the legislation's July 17 House hearing.
A broad coalition representing the United States banking sector is pushing Senate leadership to modify provisions related to stablecoin yields within the Digital Asset Market Clarity Act (CLARITY) currently being reviewed by lawmakers.
In a collaborative communication to Senate leadership, the American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), along with 76 additional state-level banking associations, expressed concerns that existing language addressing stablecoin interest, yield, and reward mechanisms lacks sufficient specificity. The banking organizations contended that legislative amendments are necessary to ensure payment stablecoins operate exclusively as transactional instruments rather than deposit alternatives.
While expressing overall support for the legislation in their joint communication, the ABA raised concerns that vague language within the bill "could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress's longstanding and clearly stated intent that payment stablecoins should serve as transaction tools rather than store-of-value products," as stated in a press release issued on Monday.
This represents the most recent opposition from America's banking sector regarding the legislation's provisions on stablecoin yields and arrives mere days before the bill faces its scheduled House of Representatives hearing on July 17. The proposed legislation seeks to create the nation's inaugural comprehensive regulatory structure for digital assets.
According to the banking coalition, the legislation in its present form creates potential for "deposit flight," prompting their call for lawmakers to amend section 404 to "clarify the prohibition on interest and yield and help ensure that the prohibition cannot be circumvented through alternative incentive structures."
This resistance aligns with Galaxy Digital's forecast that the Senate faces significant time constraints for passing the legislation before year's end, given an approaching Senate recess and competing congressional agenda items. On June 26, Galaxy Digital reduced its probability assessment for the CLARITY Act's passage into law in 2026 to 50%, pointing to the absence of a consolidated Senate Banking-Agriculture legislative text, the lack of a confirmed floor schedule, and a shrinking window for legislative action before Congress adjourns.
Banking sector, Democratic lawmakers oppose stablecoin yield components
Following its approval by the Senate Banking Committee in May, the CLARITY Act encountered resistance from Democratic members and banking industry representatives, who maintained that the legislation would permit cryptocurrency companies to provide yields on stablecoins while avoiding the regulatory obligations imposed on conventional banking institutions.
During a May interview, JPMorgan CEO Jamie Dimon indicated that the banking sector would persist in its opposition to the CLARITY Act in its current form and stated that cryptocurrency firms seeking to distribute yield on stablecoins ought to pursue banking charters.
Separately, the CLARITY Act received its second public backing from a prominent United States law enforcement organization on July 10, as the Federal Law Enforcement Officers Association (FLEOA) announced its submission of a letter to the US Senate Banking Committee expressing support for the CLARITY Act, while simultaneously advocating for enhanced accountability measures in decentralized finance (DeFi) and the maintenance of investigators' current authorities.
In early June, a coalition exceeding 200 cryptocurrency firms and associated organizations petitioned the US Senate to approve the CLARITY Act through a letter distributed by cryptocurrency advocacy group Stand With Crypto.