American Bankers Association Survey Warns Stablecoin Yields Could Threaten Deposits and Lending

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.

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 U.S. House of Representatives passed the CLARITY Act on July 17, 2025, seeking to clarify the division of digital-asset regulatory responsibilities. The GENIUS Act, signed the following day, bars issuers from paying interest directly to holders but leaves room for third-party rewards. The banking industry is therefore concerned that yield-bearing U.S. dollar stablecoins could divert low-interest deposits and erode a key source of lending funds.

Patrick Witt, executive director of the White House Council of Advisers on Digital Assets, said on March 12, 2026, that overseas users who buy U.S.-issued dollar stablecoins with local currencies bring net new funds into the banking system because the reserves are largely held in dollars or U.S. Treasuries. He disputed an April 2025 U.S. Treasury estimate warning that deposit outflows could reach $6.6 trillion. Stablecoin yield provisions in the CLARITY Act remain a key focus of negotiations.