U.S. banking groups say the latest stablecoin rewards language in the CLARITY Act still leaves banks exposed to deposit flight. They argue the revised draft may not protect the balance sheets of local lenders.
Summary
What the banks are objecting to
In a joint statement, several banking and trade organizations said the clarity act update “falls short” of blocking risks to bank deposits. Moreover, they warned that the text still permits incentives that can shift funds away from traditional accounts.
The dispute centers on how the proposal limits “interest-like” payments on idle stablecoin balances. However, the groups say transaction-based incentives could still be structured around balance size, holding duration, or tenure, which would resemble deposit returns.
That said, the banks argue that the effect could be larger than the language suggests. They say such structures would encourage users to move money out of the banking system and into crypto products.
Research, lending, and competing estimates
The organizations also pointed to earlier research from economist Andrew Nigrinis, who warned that large-scale adoption could trigger substantial outflows from the U.S. banking system. He said the pressure would be especially acute for community institutions with limited flexibility.
Moreover, the banks said those outflows could weaken community bank lending and reduce consumer and small-business credit. Their view is that the issue goes beyond payments design and into the structure of deposit based lending.
In contrast, an April analysis from White House economists offered a far smaller estimate. The report said banning stablecoin yield would increase bank lending by about $2.1 billion – roughly 0.02% – which suggests only a marginal effect on credit growth.
The wider debate also feeds into stablecoin rewards regulation, where lawmakers are trying to separate deposit-like returns from ordinary platform incentives. However, the banking sector says the line remains too blurry in practice.
Lawmakers defend the compromise
Sens. Thom Tillis and Angela Alsobrooks have defended the revised wording as a negotiated compromise. Tillis said the goal is to stop rewards from working like bank interest while still allowing platforms to offer other incentives.
That said, opposition from the banking sector has continued despite that defense. The groups plan to send lawmakers more detailed recommendations and argue that stronger limits are needed to protect deposit based lending, especially at local institutions.
The debate is unfolding as progress on the broader market-structure bill remains stalled. The House has passed the legislation, but Senate action is still uncertain because of scheduling and policy issues.
Meanwhile, some crypto industry support for the latest draft has reportedly improved after earlier setbacks. Even so, the fight over stablecoin rewards shows how much remains unsettled in the push to define the next phase of crypto rewards regulation.
For now, the banks want tighter guardrails, lawmakers want a workable compromise, and the final shape of the bill remains unresolved.
