If consumers and businesses are encouraged to move money from bank deposits into stablecoins that offer interest-like rewards, those funds will no longer support local lending in the way they previously did, American Bankers Association Chair Kenneth Kelly said in a new guest column for American Banker.
ABA has urged lawmakers to use the Clarity Act to close the payment of interest loophole for payment stablecoins. The Senate is expected to take up the legislation when it reconvenes on Sept. 14. In his column, Kelly rejected claims that community banks are somehow being cajoled into supporting closing the loophole by big banks.
“Any suggestion that small banks have been manipulated into advancing the interests of larger institutions underestimates community bankers’ independence and unfairly casts doubt on our demonstrated integrity,” he said.
Banks are not opposed to digital assets, Kelly said. He noted that his own bank provides services to the fintech sector, including crypto.
“The question is not whether blockchain technology or digital assets have a role in the future of finance. They clearly do,” Kelly said. “The question is whether that future will be built on a balanced regulatory foundation or on incentives that unintentionally pull funding away from the institutions responsible for much of America’s local lending.”
