Banking Industry Says Clarity Act Stablecoin Proposal Would Enable 'Evasion'

In brief
- Top banking groups say the new Clarity Act language leaves loopholes regarding stablecoin yield.
- The compromise would ban direct yield on stablecoins but still allow some rewards tied to account balances.
- The banks' statement comes as senators prepare for a long-delayed committee vote on the Clarity Act.
A coalition of the nation’s top banking trade groups, representing Wall Street giants and community banks alike, issued a statement Friday expressing concern that new language in a major crypto bill would benefit digital assets companies and disrupt the traditional banking industry.
For months, the banking industry and the crypto lobby have battled over key language in the Clarity Act, a bill that would formally legalize most crypto activity in the United States.
Banks want to add language to the legislation banning crypto companies from offering yield on stablecoins, cryptocurrencies pegged to the value of the U.S. dollar. The banks say such programs could make traditional, low-yield savings accounts less attractive; crypto companies, including Coinbase, have argued they should be able to compete with traditional finance.
For nearly four months, the skirmish over stablecoin yield has kept the Clarity Act from advancing in the Senate. Last week, two key lawmakers on the Senate Banking Committee finally revealed a proposed compromise on the issue, which crypto leaders quickly embraced.
Senators soon after signaled optimism that the problem was dealt with, and that a committee vote on the Clarity Act was near at hand.
But now, a united front of top banking trade groups is asking for further changes to the proposed language, arguing the current draft contains loopholes that would allow crypto companies to evade the intended prohibitions on stablecoin yield.
The compromise language, drafted by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD), would prohibit the payment of rewards on stablecoins in a manner that is “economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.”
But it would also potentially greenlight rewards tied to participation in governance, validation, and staking—and rewards calculated by referencing a user’s account balance.
Today, six banking trade groups, representing all major national banks and community banks in all 50 states, wrote a letter to the Senate Banking Committee arguing that those exceptions are overbroad.
“We are concerned… that the proposed language includes exceptions that will enable evasion of the intended prohibition and incentivize customers to hold and grow stablecoin balances at the expense of deposits,” the groups said.
The letter includes specific asks about rewording the stablecoin yield language—including striking the ability for rewards to reference account balances in any way, and changing the prohibition on payments “economically or functionally equivalent” to yield, to a prohibition on payments “substantially similar” to yield.
The letter lists numerous potential stablecoin rewards programs the banking groups say could exist under the proposed language that would violate the spirit of a potential compromise. Those include payments structured like a money market mutual fund, payments of a flat monthly reward that increases with account balance increases, and payments based on account balance but triggered by making a certain number of monthly transactions.
When banks first floated concerns about the new language earlier this week, Sen. Tillis replied in a statement that he and Sen. Alsobrooks “respectfully agree to disagree”—signaling the lawmakers were willing to proceed with a committee vote on the bill regardless.
Decrypt reached out to the two senators regarding the more granular concerns raised today by the banking trades, but did not immediately receive a response.
Time is of the essence for supporters of the Clarity Act, which senators on the Banking Committee have promised would be considered next week or the week following.
The Senate is only in session for two weeks this month, and will soon grind to a halt in advance of November’s midterm elections. Sen. Bernie Moreno (R-OH), a pro-crypto member of the Senate Banking Committee, recently urged that if the bill does not pass this month, “digital asset legislation will not pass for the foreseeable future.”

Facts Only

A coalition of top banking trade groups issued a statement concerning new language in the Clarity Act.
Banks sought language banning crypto companies from offering yield on stablecoins.
The proposed compromise would prohibit payments on stablecoins in a manner equivalent to interest on an interest-bearing bank deposit.
The compromise would allow exceptions for rewards tied to governance, validation, staking, and rewards calculated by referencing account balances.
Six banking trade groups wrote to the Senate Banking Committee arguing that the exceptions are overbroad.
The banking groups requested rewording to strike the ability for rewards to reference account balances and changing the prohibition to "substantially similar" to yield.
The dispute over stablecoin yield has delayed the advancement of the Clarity Act in the Senate for nearly four months.
The Senate Banking Committee members were preparing for a committee vote on the bill.
A pro-crypto member of the Senate Banking Committee urged that digital asset legislation would not pass without timely action.

Executive Summary

A coalition of top banking trade groups expressed concern that the proposed language in the Clarity Act regarding stablecoin yield contains loopholes that would allow crypto companies to evade intended prohibitions. The banks sought language banning yield on stablecoins equivalent to interest on bank deposits, but the proposed compromise would also allow exceptions for rewards tied to participation in governance, validation, staking, and rewards based on account balances. Six banking trade groups argued that these exceptions are overbroad and would incentivize customers to hold stablecoin balances rather than bank deposits. The groups proposed specific changes to the language, including restricting rewards based on account balances and changing the definition of the prohibition from "economically or functionally equivalent" to "substantially similar" to yield. This dispute occurs as the Clarity Act proceeds through the Senate Banking Committee, with lawmakers preparing for a committee vote.

Full Take

The conflict over stablecoin yield highlights a fundamental tension between attempts to regulate financial innovation and the strategic use of legislative language to create systemic loopholes. The core dynamic observed is the attempt by established financial gatekeepers (banks) to impose traditional risk and reward structures onto decentralized assets, while the crypto sector attempts to maintain functional parity. The banking groups’ argument, focused on preventing the erosion of traditional deposit incentives, is framed around functional equivalence, aiming to define yield as a protected category. However, the existence of exceptions for staking and balance-based rewards demonstrates that a legislative compromise is not a unified solution but a mosaic where legal mechanisms can be intentionally fragmented. This pattern suggests that regulatory victories are often achieved not through outright prohibitions, but through carefully managed distinctions that permit activity just outside the intended scope of regulation, effectively allowing the creation of parallel financial systems. The systemic implication is that when regulation is delayed, the resulting legal framework permits the operationalization of alternative reward structures that favor asset accumulation over traditional deposit safety. The debate is less about whether yield should be banned, and more about which regulatory categories are sufficient to capture the full economic reality of digital asset participation.

Sentinel — Human

Confidence

The article is highly coherent and features specific, grounded claims typical of human political and financial journalism, showing no significant signs of synthetic generation.

Signals Detected

Sentence length variance is organic; transitions are varied; the rhythm is uneven, characteristic of human editorial writing.

The text exhibits a clear, focused narrative flow centered on a specific political negotiation. The framing is focused and driven by real-world political stakes.

The article synthesizes information from multiple sources (banks, senators, crypto leaders) coherently without simply listing verbatim talking points. The structure is typical of investigative reporting.

All specific claims (names, positions, the nature of the compromise language, the specific asks made by the banks) are grounded in the context of a public legislative battle, indicating likely reliance on verifiable, traceable sources.

Human Indicators

The text successfully handles complex, multi-party political negotiation and legal language, which requires synthesizing nuanced, non-standard facts.

The focus remains highly specific (Clarity Act, stablecoin yield, specific banking trade group concerns), suggesting an input from specialized knowledge or direct reporting.

The structure includes journalistic pacing—establishing the conflict, detailing the negotiation, presenting the counter-argument, and highlighting the urgency.