Banking Trades Statement on Crypto Market Structure Yield Language

Washington, D.C. - Following the release of proposed language on stablecoin yield in the Clarity Act, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America issued the following joint statement:

"We appreciate the work by Senator Tillis and Senator Alsobrooks to address the concerns from banks of all sizes around the risk of deposit flight from paying yield on stablecoins. Now that their proposed language is public, we are working to provide feedback that balances both the innovation and the community lending necessary to ensure that America's economy is the strongest and most resilient in the world.

Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal - prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal. It is imperative that Congress get this right. Research demonstrates that yield-earning stablecoins could reduce all consumer, small-business, and farm loans by one-fifth or more, making it essential for the prohibition to be clear and transparent.

We will be sharing our detailed suggestions for strengthening the proposed language with lawmakers in the coming days, and we will continue to work in good faith to help Congress embrace innovation while protecting the deposits that drive local lending and economic activity in their communities."

Additional Background. Among the examples of evasion that could be permitted under Section 404 as drafted, the language permits exchanges and other crypto intermediaries to pay interest or yield for a user's participation in an exchange's membership program, so long as the payments are not calculated or distributed like banks' payment or distribution of interest or yield. This is a significant loophole that must be addressed.

Likewise the proposal allows for permissible rewards to be calculated by reference to duration, balance, and tenure. Overtly incentivizing the idle holding of payment stablecoins for extended periods of time, and for specific balances, would negate the goals of the upfront prohibition (to deter deposit flight) while tying rewards directly to how much/long customers hold payment stablecoins in wallets or exchanges.

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About Bank Policy Institute

The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.

About the American Bankers Association

The American Bankers Association is the voice of the nation's $25.1 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.7 trillion in deposits and extend $13.2 trillion in loans.

About Consumer Bankers Association

The Consumer Bankers Association represents America's leading retail banks. We promote policies to create a stronger industry and economy. Established in 1919, CBA's corporate member institutions account for 1.7 million jobs in America, extend roughly $4 trillion in consumer loans and provide $275 billion in small business loans annually. Follow us on X @consumerbankers.

About Financial Services Forum

The Financial Services Forum is an economic policy and advocacy organization whose members are the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, financial inclusion, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.

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.

Media Contact

Sam FabensBank Policy [email protected]

Peter CookAmerican Bankers [email protected]

Weston LoydConsumer Bankers [email protected]

Laura PeaveyFinancial Services [email protected]

Nicole SwannIndependent Community Bankers of [email protected]