Key facts
- 134 banking executives and leaders asked the Senate to revise the CLARITY Act's stablecoin provisions.
- The CLARITY Act's Section 10404 restricts interest or yield on payment stablecoins.
- Banks argue that rewards on stablecoins could lead to deposit outflows, weakening community bank lending.
- White House crypto adviser Patrick Witt called the banks' position contradictory.
- The CLARITY Act draft includes provisions for CFTC and SEC oversight of digital assets.
- Senate leaders are facing a narrowed timeline for a procedural vote on the bill.
U.S. banks are actively opposing certain provisions within the CLARITY Act concerning stablecoins, despite broader interest in the digital asset market. A group of 134 banking executives and leaders has urged the Senate to revise the bill, specifically targeting Section 10404, which prohibits the payment of interest or yield on payment stablecoins.
These banking leaders argue that allowing rewards on stablecoins could incentivize fund flows away from traditional bank deposits, potentially leading to hundreds of billions of dollars in deposit outflows. They contend that such outflows would weaken community banks' ability to provide credit to households, small businesses, and local employers.
White House crypto adviser Patrick Witt has publicly criticized the banking sector's stance, highlighting a perceived contradiction between their calls to protect community bank lending and their opposition to the stablecoin interest ban. He pointed out that the CLARITY Act already includes such a ban, yet banks are still seeking to halt or significantly alter the bill.
The CLARITY Act, recently updated in a 616-page draft by Senate Republicans, aims to establish a comprehensive digital asset market structure. The proposed framework would grant the Commodity Futures Trading Commission (CFTC) authority over spot markets for digital commodities and the Securities and Exchange Commission (SEC) oversight of investment contract assets. It also includes ethics rules for federal officials regarding digital asset issuance.
Despite initial plans for a procedural vote before the August recess, the timeline for the CLARITY Act has narrowed due to other legislative priorities. Goldman Sachs CEO David Solomon has expressed support for the bill, contrasting with the broader banking industry's push for stricter stablecoin regulations.