The CLARITY Act, the sweeping digital asset framework that cleared the House last July with bipartisan support, hit a fresh wall this week. A coalition of five major banking trade groups publicly rejected the latest compromise language on stablecoins, accusing senators of leaving a loophole that would let crypto firms effectively offer yield on stablecoins—and drain capital from the real economy.
What the banks are saying
The American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America jointly criticized Section 404 of the bill, drafted by Senators Thom Tillis and Angela Alsobrooks. In a letter, the groups claimed the provision “contains loopholes that still allow digital asset exchanges to distribute rewards tied to membership programs, potentially incentivizing idle holding of stablecoins.” Their internal research warns that yield-earning stablecoin alternatives could reduce available capital for consumer, small-business, and agricultural loans by as much as 20%.
Tillis fires back
Senator Tillis pushed back hard. He defended the drafted language, stating it “explicitly prohibits stablecoin rewards from mimicking bank deposit interest but allows other operational reward structures.” In other words, the bill draws a line—no interest-like payouts, but loyalty points or similar mechanics are still on the table. That distinction isn’t satisfying the banking lobby. Senate negotiators are holding firm, and a critical committee markup is scheduled for the week of May 11.
What’s really going on
Crypto industry analysts, including Alex Thorn of Galaxy Digital, argue the banking lobby’s primary objective isn’t fixing the text—it’s killing the bill. “Delay or deny the regulatory framework entirely,” Thorn suggested. Some institutions without massive consumer deposit arms are showing cautious comfort with the Tillis-Alsobrooks framework, but the big players aren’t budging. The Trump administration is expected to support the bill, which gives proponents a boost. Still, the clock is ticking. The markup next week will show whether the compromise can survive the pressure—or whether the stablecoin yield fight pushes the CLARITY Act back to square one.
