Five major U.S. banking trade groups jointly rejected the Tillis-Alsobrooks stablecoin compromise language in the CLARITY Act this week, escalating a fight over whether digital asset rewards should face the same rules as bank deposits. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America argue Section 404 of the bill contains loopholes that would let crypto exchanges distribute rewards based on customer tenure, account balances, and duration — even if not labeled as interest.
What the banks fear
Internal research from the banking groups claims that yield-bearing stablecoin alternatives could reduce capital available for consumer, small-business, and agricultural loans by as much as 20%. That finding underpins a $2.5 million ad campaign the American Bankers Association launched in Washington, D.C., on May 6, funded by more than 3,000 member banks. The ads frame stablecoin yield mechanisms as 'unregulated deposit theft.' A Capitol Hill fly-in with 200 bank CEOs followed on May 9, designed to apply direct pressure on Senate offices before the May 10 deadline for amendments closed.
The other side of the argument
Sen. Thom Tillis, who co-authored the compromise, said the language explicitly prohibits stablecoin rewards from functionally mimicking bank deposit interest. He also noted that some factions may oppose any passage of the CLARITY Act, regardless of the compromise. Coinbase CEO Brian Armstrong called the banks' tactics 'anti-competitive sabotage,' arguing that yield restrictions would stifle user incentives for 15 million U.S. stablecoin holders. White House Crypto Czar David Sacks sharpened the administration's position in support of the CLARITY Act, though no official statement from the White House has been released since the lobbying push.
Risk of deposit flight
A 2026 OCC report estimates $300 billion in deposit flight risk by 2028 if Section 404 loopholes go unaddressed. Federal Reserve data shows $120 billion in crypto stablecoin reserves already mirroring money market fund yields — a direct competitor to traditional bank deposits. Galaxy Digital analysts project that CLARITY Act passage could unlock $1 trillion in institutional inflows by establishing regulatory certainty. The clash leaves lawmakers with a stark choice: protect bank lending capacity or expand consumer access to crypto-based yields.
The amendments window closed Friday, May 10. The bill now heads to a floor vote without any changes to the contested Section 404 language. Banking groups have signaled they will continue the ad campaign and lobby senators directly, but the timeline for a final vote remains unclear.
