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The American Bankers Association, Independent Community Bankers of America and 76 state banking associations have asked Senate leaders to tighten the CLARITY Act’s limits on stablecoin interest and rewards.
Their July 13 letter says Section 404 could still let crypto platforms structure incentives that make payment stablecoins compete with bank deposits. The groups sent proposed changes to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer.
Bankers Want Three Section 404 Changes
The coalition wants lawmakers to remove “solely” from the clause barring yield connected to holding payment stablecoins. It argues that a platform could attach a minor activity requirement and claim the payment is not made only for keeping a balance.
The groups also want the bill to replace its functional-and-economic-equivalent standard with a “substantially similar” standard. They also asked senators to delete wording comparing the reward with interest on a stablecoin balance or an interest-bearing bank deposit.
A third request targets a provision allowing permitted rewards to be calculated using balance, duration or tenure. The bankers say those factors could reward customers for keeping more stablecoins on a platform for longer periods.
Balance and Tenure Rewards Draw Bank Objections
The associations say stablecoin rewards could pull deposits from community banks and reduce funds available for mortgages, small-business finance and agricultural lending. They support transaction-linked benefits such as payment rebates, but oppose returns tied to holding tokens.
The letter does not seek to remove stablecoins from the bill or ban every incentive. It asks Congress to separate payment activity from programs that operate like savings products without bank capital rules, supervision or deposit insurance.
Crypto companies have argued that broad restrictions would protect banks from competition and limit rewards offered by exchanges and other service providers.
Section 404 Allows Activity-Based Rewards
The Senate Banking Committee advanced its CLARITY Act text 15-9 on May 14. Section 404 bans passive, deposit-like yield while allowing activity-based rewards under joint rules from the Treasury, Securities and Exchange Commission and Commodity Futures Trading Commission.
That structure has become a central point of dispute between banking groups and crypto firms as senators continue work on the bill.
Letter Adds Another Issue Before Senate Vote
Senators must still combine the Banking Committee measure with the Agriculture Committee’s digital commodity provisions before a floor vote. Supporters also need 60 votes to move the bill through the Senate.
The July 13 letter gives senators another Section 404 issue to resolve as banking groups push for a clearer ban on stablecoin rewards tied to balances, duration or tenure.
