Banking Groups Push Senate to Tighten CLARITY Act Stablecoin Rules, Warning of Deposit Flight

The American Bankers Association, the Independent Community Bankers of America and 76 state banking groups urged Senate leaders in a joint letter on Monday to tighten the stablecoin provisions in the CLARITY Act, warning that the bill as written could let stablecoins drain deposits from community banks. The push landed the same week Senate Democrats escalated their own separate campaign against the crypto market structure bill, leaving it pressed from two directions as leaders eye a floor vote before the August recess.

Writing to Majority Leader John Thune and Minority Leader Charles Schumer, the coalition took aim at Section 404, which bans direct or indirect interest or yield on payment stablecoins but permits activity- or transaction-based rewards. The groups argued that language is too loose to hold.

“Significant questions remain regarding whether the current language in Section 404 provides sufficient clarity and certainty to achieve that objective,” they wrote in the letter.

Their central fear is deposit flight. The associations said yield-like incentives could push customers to park money in stablecoins instead of bank accounts, cutting into the deposits that fund local lending. Such a shift, a coalition of banking groups, including the ABA, warned in a May letter, “could reduce consumer, small business, and agricultural lending by one-fifth or more.”

The letter reaffirmed the banking sector’s long-standing resistance to the stablecoin yield compromise that had cleared a path for the bill’s Senate markup.

The banking letter arrived alongside a growing Democratic revolt. Senator Elizabeth Warren pressed the same Senate leaders to add ethics language, writing in a letter on Monday: “The crypto legislation heading to the Senate floor must prevent the president, vice president, senior administration officials, members of Congress, and their families from profiting off the crypto industry.” The demand follows disclosures that President Trump earned more than $1.4 billion from crypto ventures last year. Democrats including Chris Murphy and Chris Van Hollen planned a Tuesday press conference against the bill, Decrypt reported.

The CLARITY Act cleared the Senate Banking Committee 15-9 in May and now sits on the Senate calendar awaiting a floor vote, where it needs 60 votes and therefore at least seven Democrats. That math grew harder after Senator Lindsey Graham died over the weekend, narrowing the Republican majority.

Related Listen: The Chopping Block: Crypto Clarity Act Drama + Stablecoin Yield Wars + Developer Liability Fights

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