State Banking Associations Join ABA and ICBA to Raise Clarity Act Concerns Ahead of Cloture Vote

In a letter sent today to Senate leadership and shared with all senators, all 77 of America's state bankers associations, joined by the American Bankers Association and the Independent Community Bankers of America, urged lawmakers to strengthen provisions of the Clarity Act governing stablecoin interest, yield and rewards programs. In the letter, the coalition detailed specific language changes designed to reinforce Congress's longstanding intent that payment stablecoins function as transactional tools rather than store-of-value products that compete directly with bank deposits.
 
The recommendations build on extensive engagement by the banking industry over the past several months with lawmakers and staff to improve and strengthen the Clarity Act. While supporting responsible innovation and a clear regulatory framework for payment stablecoins, the associations urged senators to make modest but important changes to prevent unintended consequences for community banks and the local economies they serve.

Specifically, the groups called for targeted revisions to section 10404(c)(1) of the bill to clarify the scope and meaning of the prohibition on interest and yield and ensure that the prohibition cannot be evaded through creatively structured incentives. They also called for striking subsection 10404(3)(B) in its entirety, a provision that would allow rewards calculated by reference to balance, duration or tenure of stablecoin holdings. The groups warned that without stronger safeguards, payment stablecoins could increasingly function as substitutes for traditional bank deposits, resulting in deposit flight away from community financial institutions.
 
The letter states:
 

"Congress's longstanding and clearly stated intent is that payment stablecoins serve as transactional tools rather than store-of-value products. However, in its current form, Section 10404 does not provide sufficient clarity and certainty to distinguish payment stablecoins from 'store-of-value' products and substitutes for bank deposits. Without amendment, this ambiguity could result in a flight of deposits to stablecoins with real-world consequences. Communities cannot afford that risk."
 

The letter notes that deposits collected by community banks support mortgage lending, small-business financing, agricultural credit and other forms of relationship banking in cities, towns and rural communities across the country. The associations cautioned that policies encouraging deposit flight could reduce funding available for these activities and undermine local economic growth.
 
The letter concludes:
 

“Clarifying these provisions would help establish durable rules of the road and support responsible innovation. Importantly, these recommendations provide the clearest path to achieving Congress’ stated objective of preserving local lending by reducing the risk of unintended consequences for local economies. We appreciate your consideration and remain committed to working constructively with policymakers to resolve this issue.”
 

The groups emphasized that their recommendations are narrowly tailored and intended to strengthen, not undermine, the legislation. The proposed revisions would help establish clear and enforceable boundaries around stablecoin interest and yield while preserving the role of payment stablecoins as payment instruments rather than deposit alternatives.
 
Read the full letter.

Media Contacts:

American Bankers Association
Sarah Grano
[email protected]

Independent Community Bankers of America
Nicole Swann
[email protected]

About the American Bankers Association
The American Bankers Association is the voice of the nation’s $26.5 trillion banking industry, which is composed of small, regional and large banks that together employ over 2 million people, safeguard $20.7 trillion in deposits and extend $13.9 trillion in loans.
 
About the Independent Community Bankers of America
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation. As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.