Six major banking trade groups are pressing lawmakers to tighten language around stablecoin yields in the CLARITY Act, but a Senate aide dismissed their proposed changes as 'pretty milquetoast'. The groups — including the American Banking Association, Bank Policy Institute, and four others — sent a letter on May 8 suggesting revisions to Section 404 of the bill. Their goal: close what they see as loopholes that could let stablecoin issuers offer passive, deposit-like interest, undermining traditional bank savings accounts.
What the proposed changes would do
The letter, shared by independent reporter Eleanor Terrett in an X post, proposes two main edits. First, replace the phrase 'functional and economic equivalent' with 'substantially similar' in Section 404(c)(1). Second, delete subsection (3)(B) entirely. The banking groups argue the current wording could allow stablecoin issuers to structure yield programs that look like interest-bearing deposits, sidestepping the bill's intent. The CLARITY Act aims to ban passive interest on stablecoins but permit rewards tied to bona fide activities like staking, transaction activity, or liquidity provision — a 'buy and use' approach rather than 'buy and hold'.
Senate aide dismisses the effort
The banking lobby's push didn't get much traction on Capitol Hill. A Senate aide described the industry's proposals as 'pretty milquetoast', suggesting lawmakers are unlikely to adopt them. That matches the tone of the markup session held Thursday by the US Senate Committee on Banking, Housing, and Urban Affairs. The committee convened at 10:30 AM EST to mark up the CLARITY Act, setting the stage for floor action.
What happens next
With committee approval, the CLARITY Act still needs a full Senate vote, then must clear the House of Representatives before landing on the President's desk. The timeline remains uncertain, but the Thursday markup signals that the bill is moving. For banking groups, the fight over stablecoin yield definitions is far from over — but for now, lawmakers seem content with the existing language.
