Key facts
- Senate Democrats met on September 14, 2026, to discuss the CLARITY Act.
- The CLARITY Act includes new enforcement powers for state attorneys general.
- Banking groups are concerned that stablecoin rewards could lead to deposit flight from traditional banks.
- New York Attorney General Letitia James stated the CLARITY Act could strip state attorneys general of their authority to protect investors.
- The coalition of attorneys general challenged provisions with federal preemption, citing potential havoc on state securities regulation from the SEC's expanded powers.
Senate Democrats met on September 14, 2026, to discuss the CLARITY Act, a proposed piece of legislation aimed at regulating the cryptocurrency industry, ahead of a procedural vote scheduled for September 15. The bill has seen several updates, with recent versions incorporating changes to address Democratic demands, including expanded enforcement powers for state attorneys general.
Eight banking associations sent a letter on September 14 to Senate Republican Leader John Thune and Democratic Leader Charles Schumer, urging changes to the CLARITY Act. They expressed concern that stablecoin rewards, particularly those linked to bank deposits, could lead to deposit flight from traditional banks, potentially hindering their ability to extend credit. The associations specifically targeted Section 10404 of the bill, seeking to remove language that might allow loopholes for interest payments on stablecoin balances and advocating for a "substantially similar" test to differentiate stablecoin incentives from bank interest payments. They also called for the repeal of Section 10404(3)(B), which they believe could allow rewards to be computed based on balance, duration, or tenure.
Meanwhile, New York Attorney General Letitia James, joined by 17 other attorneys general, voiced concerns that the CLARITY Act could impede states' ability to prosecute crypto fraud. They pointed to the significant increase in cryptocurrency-related losses reported to the FBI, totaling $11.4 billion in 2025, a 22% rise from the previous year. The coalition also challenged provisions related to federal preemption, arguing that the SEC's expanded powers under the CLARITY Act could disrupt state securities regulation and urged Congress to maintain state enforcement authority and registration systems.