ABA and state banking groups oppose CLARITY Act stablecoin yield rules

Major US banking trade groups are asking Senate leaders to tighten the stablecoin yield provisions in the proposed Digital Asset Market Clarity Act (CLARITY), arguing that the current draft is too unclear and could allow certain stablecoin arrangements to operate like deposit-like products.

In a joint letter, the American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), and 76 state banking associations said the bill’s language on “interest, yield and rewards” should be clarified to ensure payment stablecoins remain focused on transaction use rather than functioning as substitutes for deposits. The lawmakers’ comments arrive amid heightened scrutiny of CLARITY and shortly before a House of Representatives hearing scheduled for July 17.

Key takeaways

• The ABA/ICBA-led letter argues that CLARITY’s stablecoin yield language is ambiguous enough to permit incentives that resemble deposit substitutes.
• Banking groups are urging lawmakers to revise section 404 to clarify the prohibition on interest and yield and prevent workarounds via alternative incentive structures.
• The push adds to broader industry and political debate after the bill cleared the Senate Banking Committee in May but faced continued resistance from Democrats and traditional banking.
• Galaxy Digital previously flagged a shrinking legislative window in the Senate before recess, and timing remains a key risk for passage.

Banking industry warns stablecoin yields could mimic deposits

According to an ABA press release from Monday, the ABA and ICBA—along with 76 state banking associations—backed the overall goal of CLARITY while specifically contesting the stablecoin interest and reward provisions. The groups said the bill’s current wording could “encourage stablecoin arrangements” to effectively replace deposits, despite what they describe as Congress’s longstanding intent to treat payment stablecoins as transaction tools rather than store-of-value products.

Their core concern is that even if the bill attempts to restrict interest-bearing behavior, unclear drafting could leave room for structured incentives that achieve similar economic outcomes. That distinction matters for regulators and legislators because deposit-like products typically fall under a different set of safeguards, oversight expectations, and consumer-protection frameworks than transaction-only payment instruments.

The banking groups warned that the ambiguity could trigger a “deposit flight,” a phrase used to describe the risk that deposits could move away from banks if stablecoin offerings appear economically comparable to bank accounts.

Proposed fix targets section 404’s “interest and yield” boundary

Beyond describing the risk, the letter lays out what the banking industry wants changed. The groups urged lawmakers to amend section 404 to “clarify the prohibition on interest and yield” and ensure the restriction “cannot be circumvented through alternative incentive structures.”

In other words, the argument is not simply that stablecoin issuers should be barred from paying traditional interest. It is that any regime allowing “rewards” or “yield” could be reinterpreted or engineered in ways that replicate deposit economics—potentially undermining the bill’s intended separation between payment stablecoins and interest-bearing store-of-value products.

This request is significant because section 404 sits at the center of the policy fight: it is where lawmakers attempt to draw a bright line between permissible transaction activity and prohibited deposit-like behavior.

Debate continues after Senate Banking Committee approval

CLARITY cleared the Senate Banking Committee in May, but it has not ended political and industry disagreement—especially around whether crypto firms could offer stablecoin yields without facing requirements comparable to traditional banks.

Democratic lawmakers and the banking industry have both criticized the measure for that perceived mismatch. The bill’s supporters argue that clarity would bring accountability and a workable framework for digital assets, but critics contend the draft could permit yield features that functionally compete with bank products.

This tension has also been reflected in public statements from major banking leaders. In a May interview highlighted in Cointelegraph coverage, JPMorgan CEO Jamie Dimon said the banking industry would continue to “fight” the current version of CLARITY and argued that crypto firms that want to provide yield on stablecoins should seek banking charters. Earlier coverage from Cointelegraph noted that position in the context of the banking sector’s continuing pushback against the legislation’s approach to yield.

Legislative odds and the countdown before potential recess

While different parts of the ecosystem have weighed in on CLARITY, timing may be just as consequential as drafting details. The banking letter arrives “just days ahead” of the bill’s scheduled House hearing on July 17, with the broader effort aiming to create the first comprehensive regulatory framework for digital assets in the US.

At the same time, market participants have been assessing whether Congress can actually move the bill through both chambers. Galaxy Digital previously reduced its odds for CLARITY to become law in 2026, cutting its estimate to 50% on June 26, according to Cointelegraph coverage of Galaxy’s view. Galaxy cited the absence of a unified Senate Banking-Agriculture text, the lack of a firm floor schedule, and a narrowing legislative window as lawmakers approach the period when they leave Washington.

The latest banking push strengthens the view that key issues—particularly stablecoin yield restrictions—could still face negotiation. Even if the bill advances, changes requested by bank trade groups could reshape how the stablecoin interest/reward line is interpreted and enforced.

What to watch next

With a House hearing coming up and continued cross-industry pressure on how section 404 should be interpreted, investors and builders should watch whether Senate leaders narrow the stablecoin yield rules in response to banking concerns—and whether lawmakers can maintain momentum on a full-bill path before legislative time runs out.