ABA and state banking groups push back on CLARITY Act yields
The American Bankers Association and 76 state banking groups have urged Senate leaders to tighten the CLARITY Act's stablecoin yield rules. In a joint letter, the ABA and state banking groups warn ambiguous Section 404 language could let payment stablecoins act as deposit substitutes, risking deposit flight days before a July 17 House hearing on the crypto bill.
Key Takeaways
- The ABA, ICBA, and 76 state banking associations sent a joint letter to Senate leaders calling for clearer stablecoin yield guardrails in the CLARITY Act.
- Banking groups say current Section 404 language is too ambiguous and could encourage stablecoins to function as deposit substitutes rather than payment tools.
- The pushback arrives ahead of a scheduled House of Representatives hearing on July 17, as lawmakers debate the first US digital-asset regulatory framework.
- Industry opposition adds pressure to an already tight legislative calendar, with analysts questioning whether the Senate can pass the bill in 2026.
Why are ABA and state banking groups pushing back?
A wide swath of the US banking industry is urging Senate leaders to amend the stablecoin yield provisions of the Digital Asset Market Clarity Act now under consideration. The American Bankers Association, the Independent Community Bankers of America, and 76 state banking associations argued in a joint letter that current language on stablecoin interest, yield, and rewards is too ambiguous.
The groups support the broader bill but want amendments that prevent payment stablecoins from acting as deposit substitutes rather than pure transaction tools. According to a Monday press release, the ABA is concerned that ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress's intent that payment stablecoins should serve as transaction tools rather than store-of-value products.
What does Section 404 of the CLARITY Act cover?
The banking groups said the current draft poses the risk of deposit flight and urged lawmakers to revise Section 404 to clarify the prohibition on interest and yield. They want language that ensures the prohibition cannot be circumvented through alternative incentive structures.
The CLARITY Act cleared the Senate Banking Committee in May but met pushback from Democrats and the banking industry, who argued it would allow crypto firms to offer yields on stablecoins without facing the same requirements as traditional banks. This marks the latest pushback from the US banking industry against the act's stablecoin yield provisions.
What happens next for the CLARITY Act?
The letter comes just days ahead of the bill's scheduled House of Representatives hearing on July 17. The CLARITY Act aims to establish the first regulatory framework for digital assets in the United States, making the stablecoin yield fight a pivotal test for the legislation's path through Congress.
The pushback reinforces predictions that the Senate is running out of time to pass the bill before the end of the year. Galaxy Digital cut its odds of the CLARITY Act becoming law in 2026 to 50% on June 26, citing the lack of a unified Senate Banking-Agriculture text, no firm floor schedule, and a narrowing legislative window.
Meanwhile, more than 200 crypto companies urged the US Senate to pass the CLARITY Act in a June letter shared by lobby group Stand With Crypto. The bill also secured a second public endorsement from a major US law enforcement organization on July 10, when the Federal Law Enforcement Officers Association submitted a letter to the Senate Banking Committee endorsing the legislation. For ongoing coverage of US crypto regulation, see our Fintech & Crypto Alerts section.
Who else is weighing in on stablecoin yields?
In a May interview, JPMorgan CEO Jamie Dimon said the banking industry would continue to fight against the current version of the CLARITY Act. Dimon argued that crypto companies wanting to pay yield on stablecoins should apply for banking charters instead.
The joint letter, published alongside the ABA's Monday announcement, signals that traditional finance groups remain a formidable counterweight to the crypto industry's lobbying push. Read the full CoinTelegraph report and the ABA press release for additional detail.