Joint Trades Letter to Senate Banking Committee on Payment Stablecoin Yield

Dear Chairman Scott and Ranking Member Warren:

The undersigned trade associations, representing depository institutions that serve millions of American consumers, write to urge you to address critical concerns raised by banks of all sizes regarding the risk of deposit flight and diminished credit and lending associated with permitting yield on payment stablecoins. Recently, Senators Tillis and Alsobrooks released new Section 404 language of the CLARITY Act that reflects their efforts to balance financial innovation with the foundational role that bank deposits play in supporting lending, economic growth and community development. Their efforts have improved Section 404 compared to the original Section 404 language that was included for consideration at markup in January. Additional work, however, is needed to arrive at text that embraces the innovation represented by digital assets while also protecting consumers, ensuring the stability of the U.S. financial system and mitigating the risks to Main Street communities posed by the payment of yield or interest onpayment stablecoins.

Our concern is that payment stablecoin yield, or incentives that act like yield, can reduce U.S. deposits and, in turn, banks' capacity to extend credit across the country. We are aligned with the distinction the proposal is trying to draw—that certain payment stablecoin transactions and activities will be allowed to generate rewards, like a rebate or incentive provided in connection with the acceptance or use of a payment stablecoin, while interest-like payments on stablecoin balances or other stores of value will be prohibited. We are concerned, however, that the proposed language includes exceptions that will enable evasion of the intended prohibition and incentivize customers to hold and grow stablecoin balances at the expense of deposits.

Download the joint trades letter to read the full text.