ABA Urges Tighter Stablecoin Yield Rules in CLARITY Act

The Clarity Act is intended to draw clearer regulatory boundaries for the US digital-asset market, but its treatment of stablecoins has turned community banks into a key political constituency. Wall Street lenders and banking trade groups argue that wider stablecoin adoption could pull low-cost deposits from smaller institutions, weakening their ability to extend credit to households and local businesses.

The latest debate offers competing diagnoses of the threat facing Main Street banks. Critics say the Clarity Act would leave smaller lenders at a disadvantage as stablecoins expand. Other analysis argues their more immediate source of deposit erosion is competition from the biggest banks, not crypto tokens. With a vote approaching, community banks are being used both as the case against the legislation and as institutions whose existing competitive pressures remain unresolved.

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 aims to establish regulatory responsibilities for the U.S. digital asset market. The dispute centers on whether Section 404 can prevent stablecoins from effectively paying interest through rewards. Banks fear funds could move from FDIC-insured deposits into stablecoins, weakening lending for mortgages, small and medium-sized businesses, and agriculture. The Treasury Department estimates that as much as $6.6 trillion in deposits could be at risk of outflows.

On July 13, the American Bankers Association, the Independent Community Bankers of America and 76 state banking associations urged bipartisan Senate leaders to tighten Section 404. The bill passed the Senate Banking Committee by a 15–9 vote on May 14, but no date has been set for a floor vote. That uncertainty could make it difficult to enact the legislation before the November 2026 midterm elections.

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.

Payment stablecoins are typically redeemable at a fixed value of $1, with issuers profiting from interest earned on reserves. Banks fear deposit outflows if those returns are passed on to holders. The GENIUS Act became law on July 18, 2025, establishing a framework for payment stablecoins. The CLARITY Act would divide oversight between the SEC and CFTC, making the yield dispute a key hurdle to advancing market-structure legislation in the Senate.

The Office of the Comptroller of the Currency unveiled a draft rule on March 2, 2026, that would prohibit permitted issuers from paying interest in cash or tokens solely for holding or using payment stablecoins. Indirect payments through affiliates would also be presumed to violate the rule. The proposal also covers state-regulated issuers overseen by the OCC with more than $10 billion in issuance, and comments are due by May 1. The same day, Senators Thom Tillis and Angela Alsobrooks finalized a compromise on yield provisions in the CLARITY Act.