134 Bank Leaders Urge Tightening of CLARITY Act Stablecoin Rule

A coalition of 134 banking association officers and bank executives sent a letter to Senate Majority Leader John Thune and Minority Leader Charles Schumer asking for changes to the CLARITY Act before final passage.

The signers include officers and executives from community, regional and state banks across the United States.

They asked lawmakers to revise Section 10404, the provision that restricts paying interest or yield on payment stablecoins, to close potential loopholes. The group argued current language could allow companies to use rewards, holding-based incentives or retention programs to create interest-like benefits.

The letter warned incentives tied to balances, holding periods or account duration could attract long-term balances and replicate the economic effects of deposit accounts. Bank leaders said a decline in deposits could reduce funding available for mortgages, small business loans, agricultural credit and community investment.

“We therefore urge the Senate to incorporate the targeted Section 10404 changes recommended by our state bankers associations before final passage,” the letter read. It added, “If stablecoin products are permitted to attract and retain balances through interest-like rewards or other holding-based incentives, the local funding base that supports this lending could be weakened by hundreds of billions.”

The letter urged the Senate to adopt the targeted changes recommended by state bankers associations and framed those revisions as a way to allow payment-focused stablecoin activity while limiting structures that replicate deposit-like incentives without the same oversight.

The request reflects a broader debate over whether payment stablecoins should function only as transaction tools or also be used to attract and hold customer balances. Lawmakers and industry participants are discussing how to define prohibited yield arrangements and how reserve structures, rewards programs and incentives could affect competition with insured banks.

The final Senate language on the CLARITY Act will determine whether payment-focused digital assets are limited to transaction use or allowed to offer returns similar to deposits without equivalent regulatory safeguards.