Bank Executives Urge Revision of CLARITY Act's Stablecoin Interest Restrictions
134 officials from the American Bankers Association and bank executives urged the Senate to amend Section 10404 of the CLARITY Act before its final passage to strengthen restrictions on interest and returns paid on stablecoins.
The stakeholders hope to broaden the scope of restrictions to prevent companies from providing similar economic benefits for holding stablecoins through rewards, incentives, or other arrangements; if stablecoins can attract balances through interest-like rewards, the funding base supporting local loans could be weakened by hundreds of billions of dollars.
Bank deposits are the foundation for loans to households, small businesses, farmers, and local employers. The signatories believe that clear rules can allow the development of payment stablecoins while preserving financing channels that support community loans.
Source: Public Information
ABAB AI Insight
The American Bankers Association and several banking institutions have been lobbying since the GENIUS Act to extend the stablecoin "interest ban" from issuers to platforms and affiliates; this concentrated letter regarding Section 10404 of the CLARITY Act is another push before the Senate finalizes the text, attempting to close off paths like "rewards" and "incentives" that could circumvent the ban.
In terms of capital pathways, the banking system views low-cost deposits as the core liability source for local credit. If stablecoins can offer passive returns close to deposits, it may lead to deposit outflows; banks are lobbying through legislation to maintain this funding base, directing resources towards political and regulatory communication to protect the traditional loan-deposit interest margin model.
A similar response can be seen from banks during the rise of money market funds and high-yield deposit products: first, they lobbied regulators to limit the attractiveness of competing products, then adjusted their own product structures. Currently, stablecoin regulation is still in the boundary dispute phase of "prohibiting passive returns + allowing active rewards."
Essentially, this is a regulatory change: when new payment tools have the ability to attract idle funds, traditional deposit institutions use legislation to directly protect their liability side, re-anchoring pricing power and fund retention rights within the banking system.
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- The true value of deposits lies in their ability to support local loans.
- Once passive returns are allowed, funds will be repriced.
- The last mile of rules often determines who retains funds.