If deposits begin moving from community banks into stablecoin products because those products offer yield or rewards, the lending capacity supported by those deposits goes away, Kennebec Savings Bank President and CEO Andrew Silsby wrote in a guest column for the Bangor Daily News.
The Senate is expected to take up the Clarity Act when it reconvenes next week. The legislation would establish a regulatory framework for digital assets, much like last year’s Genius Act did for payment stablecoins. The American Bankers Association and others have urged senators to use the Clarity Act to close a loophole that allows digital asset service providers to avoid the existing prohibition on stablecoin interest and yield.
In his column, Silsby noted that community banks use local deposits to fund local loans. He also noted that the push for closing the loophole isn’t about protecting banks from competition or opposing innovation. Rather, it is about making similar products play by similar rules.
“If an organization wants to attract customer funds by offering interest-like returns, it should be subject to safeguards that apply to banks,” he wrote. “Products that function like deposit accounts should not be allowed to sidestep the consumer protections and regulatory oversight that apply to traditional banking.”
