In a joint letter to Senate leaders, the American Bankers Association, the Independent Community Bankers of America and 76 state associations representing thousands of community financial institutions across the U.S. expressed genuine concerns with the Clarity Act and urged targeted changes to provide greater certainty that payment stablecoins cannot function as substitutes for bank deposits.
In the letter, the associations expressed support for responsible innovation and a well-regulated digital asset marketplace while emphasizing the need for clear and enforceable guardrails around stablecoin interest, yield and reward programs. They noted that engagement with lawmakers and regulators has led to meaningful improvements in the legislation, including efforts to address the industry’s concerns.
“At the same time, significant questions remain regarding whether the current language in Section 404 provides sufficient clarity and certainty to achieve that objective,” the associations said. “In particular, we remain concerned that ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress’s longstanding and clearly stated intent that payment stablecoins should serve as transaction tools rather than store-of-value products.”
Possible fixes
To address concerns, the associations urged targeted revisions to Section 404 that would clarify the prohibition on interest and yield and help ensure that the prohibition cannot be circumvented through alternative incentive structures. They also urged lawmakers to replace the bill’s “functional and economic equivalent” standard with a “substantially similar” standard and to remove language they believe could create ambiguity regarding rewards tied to stablecoin balances, duration or tenure.
“Removing this provision aligns with our shared objective to not incentivize the idle holding of payment stablecoins for extended periods of time,” the associations said. “Retaining this section would negate the goals of the upfront prohibition (to deter deposit flight) while tying rewards directly to how much and for how long customers hold payment stablecoins in wallets or exchanges.”
The groups urged senators to strengthen the legislation before final passage by incorporating the proposed changes and providing greater certainty that incentives tied to the holding, retention or balance of payment stablecoins cannot be used in ways that undermine congressional intent.
“Clarifying these provisions would help establish durable rules of the road, support responsible innovation, and provide the clearest path to achieving Congress’s stated objective while reducing the risk of unintended consequences for consumers and communities alike,” they said
The associations concluded by reaffirming their commitment to working constructively with policymakers to resolve the issue.
