U.S. Banking Groups Say CLARITY Act Stablecoin Proposal Falls Short of Protecting Deposits

The CLARITY Act is intended to establish a clearer U.S. regulatory framework for digital-asset markets, but its fate has become entangled with a dispute over stablecoin rewards. The American Bankers Association and community-bank advocates argue that interest-like incentives could pull deposits away from institutions that fund mortgages, farms and small businesses. Critics counter that large banks have already eroded smaller rivals’ deposit bases through superior technology and scale, making stablecoins a convenient target in a broader lobbying battle.

ABA Chair Kenneth Kelly said on Sept. 2 that community banks were acting independently, rejecting claims that Wall Street had enlisted them as political cover. He urged lawmakers to close the stablecoin-interest loophole before the Senate reconvenes on Sept. 14, ahead of a Sept. 15 procedural vote requiring 60 votes. Critics highlighted the competitive imbalance: JPMorgan spends nearly $20 billion annually on technology, while a typical community bank with $500 million in assets spends about $4 million, much of it maintaining legacy systems.

The Digital Asset Market Clarity Act seeks to divide oversight of crypto assets between the US Securities and Exchange Commission and the Commodity Futures Trading Commission while complementing stablecoin rules. The House passed the measure on July 17, 2025, by a 294-134 vote. Its final shape matters to banks because privately issued digital money could affect deposits, payment-system safeguards and competition across financial services.

American Bankers Association President and Chief Executive Officer Rob Nichols said in August 2026 that the group wants Congress to strengthen the Clarity Act, not dismantle it. The ABA is pressing lawmakers to close regulatory gaps involving stablecoins and other crypto assets while preserving room for responsible digital-finance innovation. Its position frames stronger guardrails as necessary to protect financial stability and maintain comparable rules for banks and nonbank issuers.

The U.S. Senate’s 616-page Digital Asset Market Clarity Act proposal seeks to establish a federal market structure for digital assets and delineate oversight between the Securities and Exchange Commission and Commodity Futures Trading Commission. Its stablecoin provisions address a central dispute between banks and crypto firms: whether payment tokens should compete with deposits. The draft treats payment stablecoins as uninsured digital cash for transactions and settlement, not as deposits or investment products.

An analysis published July 22 said the proposal would bar crypto platforms from paying U.S. customers interest solely for holding payment stablecoins. Rewards could remain permissible when linked to payments, remittances, liquidity provision, collateral, staking, governance or loyalty programs. If enacted, the SEC, CFTC and Treasury Department would have one year to jointly clarify the boundary and publish a nonexclusive list of permitted programs. Knowing and willful violations could draw civil penalties of as much as $5 million per violation.

As the United States advances the Digital Asset Market Clarity Act, or CLARITY Act, to regulate stablecoins, the boundary between traditional finance and cryptocurrency is being redrawn. Banks fear that if the bill allows issuers to offer interest or yield indirectly, payment stablecoins would effectively become substitutes for deposits. That would threaten traditional banks' funding sources and could weaken the banking system's lending capacity, prompting strong resistance and calls for amendments from the traditional financial sector.

On July 13, 2026, the American Bankers Association, the Independent Community Bankers of America and other groups sent a joint letter to Senate leaders seeking revisions to ambiguous stablecoin yield language in Section 404 of the bill. The ICBA warned that failure to close the loophole could drain as much as $1.3 trillion in bank deposits and reduce lending capacity by $850 billion. The bill passed a Senate committee in May, with a hearing scheduled for July 17.

The CLARITY Act moving through the U.S. Congress seeks to establish a federal regulatory framework for digital asset markets. Whether stablecoins may pay yields to holders has implications for bank deposits, the payments market and crypto companies’ business models. JPMorgan said traditional banks fear deposit outflows, while the crypto industry wants to preserve yield-bearing structures, deepening the legislative dispute.

JPMorgan’s latest report said the probability of the CLARITY Act passing by December 31, 2026, has declined because of political resistance and the unresolved definition of “stablecoin yield.” The recent debate has centered on whether stablecoins should be allowed to pay interest, with the banking and crypto industries yet to reach a consensus. Available information on the event disclosed neither a specific market value nor a new voting date.

Stablecoins are generally pegged one-to-one to the U.S. dollar and were originally designed for payments and trade settlement. The GENIUS Act, enacted in the United States on July 18, 2025, bars issuers from paying interest directly, but whether platform rewards amount to indirect yield remains a point of contention in the CLARITY Act debate. The American Bankers Association, or ABA, argues that an outflow of money from banks could weaken deposit-funded community lending, citing a Treasury Department estimate that $6.6 trillion in deposits could be at risk.

On June 3, 2026, the ABA released an online survey of 2,000 U.S. adults conducted by Morning Consult, with a margin of error of about plus or minus 2 percentage points. If stablecoin yields were to reduce community lending, 57% of respondents would support a congressional ban and 19% would oppose one. Some 69% were concerned that banks would have less money available to lend, 61% favored a cautious legislative approach, and about 30% planned to buy or use digital assets within the next year.

The CLARITY Act aims to divide oversight of crypto assets between the US Securities and Exchange Commission and the Commodity Futures Trading Commission while strengthening the GENIUS Act’s restrictions on interest payments by stablecoin issuers. A central issue is whether platforms such as Coinbase may distribute rewards. Coinbase generated more than $1.3 billion in stablecoin-related revenue in 2025, and the rules could reshape platform business models and competition for bank deposits.

The US Senate Banking Committee released a revised 309-page draft on May 12 incorporating a compromise reached by Thom Tillis and Angela Alsobrooks on May 1. It would prohibit interest or yield paid solely for holding stablecoins while preserving activity-based rewards tied to transactions, payments and platform use. The committee approved the bill by a 15–9 vote on May 14 and sent it to the full Senate for consideration.