Five major US banking trade groups fired off a joint statement this week warning that the bipartisan compromise on stablecoin rewards in the Clarity Act doesn't go far enough to protect bank deposits. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America say the bill's current language creates a loophole that could let crypto exchanges pay yield on stablecoins in ways that still resemble bank interest.
Section 404 and the 'idle holdings' problem
The groups zeroed in on Section 404, which allows crypto exchanges to pay yield through user membership programs as long as the payouts aren't structured like bank interest. The banks argue that the language is too loose. Rewards calculated based on how long a user holds stablecoins, how much they hold, and their tenure — the exact metrics banks say mirror deposit-based interest — would still be permitted. That, they say, rewards idle stablecoin holdings and defeats the whole point of preventing deposit flight from the traditional banking system.
The trade groups plan to submit detailed suggestions within days, ahead of a Senate Banking Committee markup expected later this month.
Tillis pushes back
Senator Thom Tillis, who co-authored the bipartisan compromise with Senator Angela Alsobrooks after months of talks involving banks, the White House, and crypto firms, pushed back on the criticism. Tillis said the compromise already prohibits stablecoin rewards from resembling interest on bank deposits. He noted that banks had a seat at the table for months. His warning: don't let 'the perfect become the enemy of the good.'
The provision in question bars deposit-style yield but leaves room for rewards tied to genuine on-platform activity — things like trading fees or liquidity provision. The banks see the line as blurry, especially when rewards depend on balance and duration.
What happens next
The lobbying groups have days to file their formal suggestions. The Senate Banking Committee markup is the next big hurdle. If the banks get their way, the language on stablecoin yield could tighten significantly, potentially cutting off the rewards programs that some crypto exchanges have already rolled out. Tillis and Alsobrooks will have to decide whether to amend the compromise or hold the line. The clock is ticking.
