Banking Trade Groups Urge Senate Banking Leaders to Strengthen Stablecoin Yield Guardrails to Prevent Deposit Flight

WASHINGTON, D.C. - A coalition of financial trade associations representing banks of all sizes today urged Senate Banking Committee leaders to make important technical refinements to proposed payment stablecoin yield language in the CLARITY Act, warning that allowing interest like yield on stablecoins could weaken bank deposits and reduce credit available to consumers, small businesses and farmers.

In a new letter to Chairman Tim Scott and Ranking Member Elizabeth Warren, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, Independent Community Bankers of America and National Bankers Association express appreciation for recent efforts to improve the legislation's Section 404 by Senators Tillis and Alsobrooks, while noting that additional changes are needed to ensure the bill clearly prohibits interest like payments on stablecoins and avoids unintended loopholes. The groups said they remain committed to working with the Administration, Congress, regulators and other stakeholders to advance responsible innovation while safeguarding the strength of the U.S. financial system.

"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," the groups wrote.

The letter, which was also shared with other members of the Senate Banking Committee, emphasizes that deposits play a critical role in supporting lending and economic growth nationwide, and that ambiguities in the current language could incentivize customers to shift funds out of the banking system.

"Research indicates that deposit flight driven by the widespread adoption of yield bearing stablecoins could reduce consumer, small business, and agricultural lending by one fifth or more, highlighting the stakes involved in ensuring that the statutory framework is both precise and robust," the groups said.

The associations urged lawmakers to make targeted revisions to clarify the prohibition on interest and yield, eliminate provisions that could be used to circumvent congressional intent, and better align the bill's text with the goal of protecting consumers and financial stability.

"Our goal in offering these recommendations, which we believe are consistent with Senator Tillis and Senator Alsobrooks' critical policy goal of stopping deposit flight, is to ensure any final legislation signed into law ushers in a new financial market designed to fully accommodate digital assets and blockchain technologies, while also protecting the economic resilience of America's consumers, small businesses, and communities," the letter concludes.

Read the full letter HERE.