ABA Urges Congress to Strengthen Clarity Act

The CLARITY Act is intended to establish a U.S. market structure for digital assets, but stablecoin rewards have become a flashpoint. The GENIUS Act bars payment stablecoin issuers from paying holders interest, yet banks say crypto firms can sidestep that line through yield-like incentives. They argue deposits shifted into stablecoins would largely back Treasury securities and other reserve assets instead of mortgages, small-business credit, commercial real estate and farm lending in local communities.

On Sept. 2, Kenneth Kelly, chairman and CEO of Detroit-based First Independence Bank and chair of the American Bankers Association, urged the Senate to tighten the CLARITY Act’s language on stablecoin incentives. Responding to an Aug. 25 critique that community banks were being used to advance big-bank interests, Kelly said their concerns were independent and substantive. He warned that migration at scale could put billions of dollars in lending capacity at risk and said payment stablecoins should not become lightly regulated deposit substitutes.

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.

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.