Key Takeaways:
Seventy-eight US banking groups are demanding the Senate close stablecoin yield loopholes in the CLARITY Act, warning the current draft could trigger a deposit exodus from community lenders.
The American Bankers Association, Independent Community Bankers of America and 76 state banking associations sent a joint letter to Senate leaders on July 14 arguing that Section 404 of the Digital Asset Market Clarity Act contains ambiguous language that could allow crypto platforms to offer interest-like incentives on payment stablecoins without facing the same regulatory requirements as traditional banks.
"Ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress's longstanding and clearly stated intent that payment stablecoins should serve as transaction tools rather than store-of-value products," the groups wrote in the letter, which was published Monday.
The banking coalition urged lawmakers to revise Section 404 to "clarify the prohibition on interest and yield and help ensure that the prohibition cannot be circumvented through alternative incentive structures." The groups warned that significant deposit outflows from yield-bearing stablecoins would reduce the money available for mortgages, small-business loans and agriculture credit in local communities.
The pushback comes three days before the House Financial Services Committee's Digital Assets Subcommittee holds a field hearing in New York City on July 17, targeting Wall Street institutions and crypto exchanges that would operate under the bill's proposed framework. The hearing is widely seen as a legislative maneuver to consolidate industry testimony and apply political pressure on the Senate before the August 7 recess — the last viable window for floor action on the bill in 2026.
The stablecoin yield fight
The CLARITY Act cleared the Senate Banking Committee on a 15-9 vote on May 14 and was placed on the Senate Legislative Calendar on June 1. But the bill has faced sustained opposition from Democrats and the banking industry over its stablecoin provisions.
JPMorgan Chase Chief Executive Officer Jamie Dimon said in a May interview that the banking industry would continue to "fight" against the current version of the act, arguing that crypto companies wanting to pay yield on stablecoins should apply for banking charters.
Negotiators have tried to ban passive yield on idle balances while allowing for specific activity-based incentives, but the banking groups said the current carve-outs still leave workarounds that mimic deposit interest in practice. If the language is strengthened, interest-like stablecoin products would be effectively stopped, constraining some crypto business models.
Narrowing odds for 2026 passage
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 before lawmakers leave Washington. Prediction markets have also priced in declining probability, with YES odds falling to 37.5%.
The bill has drawn support from more than 200 crypto companies and organizations, which urged the Senate to pass the legislation in a June letter shared by lobby group Stand With Crypto. The Federal Law Enforcement Officers Association also endorsed the act on July 10, while calling for stronger accountability in decentralized finance and preservation of investigators' existing powers.
The bill's core architecture assigns the Commodity Futures Trading Commission exclusive authority over spot markets for digital commodities — including Bitcoin and other assets on networks deemed sufficiently decentralized — while the Securities and Exchange Commission retains jurisdiction over digital assets that qualify as investment contracts. That jurisdictional clarity is what exchanges, brokers and token issuers have been waiting on after years of parallel SEC and CFTC enforcement actions drove compliance costs higher and pushed developers toward offshore jurisdictions.
This article is for informational purposes only and does not constitute investment advice.
