The banking lobby is turning up the pressure on Capitol Hill as the Senate prepares to vote on updated stablecoin legislation that could reshape how crypto firms offer yield-bearing products.
A coalition of major banking trade groups — including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America — warned lawmakers Monday that proposed language in the CLARITY Act still leaves what they call a “significant loophole” for crypto firms to offer bank-like returns on stablecoins.
At the center of the dispute is whether crypto platforms should be allowed to reward users for holding or transacting with stablecoins. Senators Thom Tillis and Angela Alsobrooks recently introduced compromise language intended to prohibit stablecoin products that function like interest-bearing bank accounts while still allowing certain transaction-based rewards programs.
Banking groups argue the revised language does not go far enough and could accelerate deposit migration away from traditional banks and into crypto platforms. Industry associations cited research suggesting widespread adoption of yield-bearing stablecoins could reduce lending capacity for consumers, small businesses and farms.
Crypto firms, meanwhile, say an overly broad ban would undermine innovation and prevent U.S.-regulated stablecoins from competing with offshore alternatives. Coinbase CEO Brian Armstrong has urged lawmakers to advance the legislation, while industry advocates maintain that activity-based rewards should remain permissible if they are not structured as traditional deposit interest.
The debate has become one of the biggest sticking points for broader digital asset legislation in Washington. While lawmakers appear closer to a compromise than earlier this year, disagreement over stablecoin yield remains a flashpoint between banks seeking to protect deposits and crypto companies pushing for broader financial utility.