ABA, ICBA Join State Associations in Urging Senate to Strengthen Stablecoin Yield Provisions in Clarity Act

In a new letter to Senate Majority Leader John Thune and Minority Leader Charles Schumer today, the American Bankers Association and Independent Community Bankers of America joined 76 state associations representing thousands of community financial institutions across the country expressing genuine concerns with the Clarity Act and urging targeted changes to provide greater certainty that payment stablecoins cannot function as substitutes for bank deposits.

In the letter, the associations expressed support for responsible innovation and a well-regulated digital asset marketplace while emphasizing the need for clear and enforceable guardrails around stablecoin interest, yield and reward programs. They noted that engagement with lawmakers and regulators has led to meaningful improvements in the legislation, including efforts to address the industry's concerns.

"At the same time, significant questions remain regarding whether the current language in Section 404 provides sufficient clarity and certainty to achieve that objective," the associations wrote. "In particular, we remain concerned that ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress's longstanding and clearly stated intent that payment stablecoins should serve as transaction tools rather than store-of-value products."

The letter warns that deposit flight could have significant consequences for community financial institutions and the customers they serve. Deposits held by community banks help support mortgage lending, small-business financing, agricultural credit and other forms of relationship banking that drive local economic growth. The associations stressed that "ensuring that stablecoin regulations draw clear and enforceable boundaries around interest- and yield-like incentives is therefore essential to preserving the flow of credit that local communities depend upon."

To address these concerns, the associations urge targeted revisions to Section 404 that would clarify the prohibition on interest and yield and help ensure that the prohibition cannot be circumvented through alternative incentive structures. They also urge lawmakers to replace the bill's "functional and economic equivalent" standard with a "substantially similar" standard and to remove language they believe could create ambiguity regarding rewards tied to stablecoin balances, duration or tenure.

"Removing this provision aligns with our shared objective to not incentivize the idle holding of payment stablecoins for extended periods of time," the associations wrote. "Retaining this section would negate the goals of the upfront prohibition (to deter deposit flight) while tying rewards directly to how much and for how long customers hold payment stablecoins in wallets or exchanges."

The groups urged senators to strengthen the legislation before final passage by incorporating the proposed changes and providing greater certainty that incentives tied to the holding, retention or balance of payment stablecoins cannot be used in ways that undermine congressional intent. "Clarifying these provisions would help establish durable rules of the road, support responsible innovation, and provide the clearest path to achieving Congress's stated objective while reducing the risk of unintended consequences for consumers and communities alike," the letter states.

The associations concluded by reaffirming their commitment to working constructively with policymakers to resolve the issue.

Read the full letter.

Media Contacts:

Sarah Grano
American Bankers Association
[email protected]

Phalen Kuckuck
Independent Community Bankers of America
[email protected]

About the American Bankers Association
The American Bankers Association is the voice of the nation's $26.1 trillion banking industry, which is composed of small, regional and large banks that together employ over 2 million people, safeguard $20.5 trillion in deposits and extend $13.7 trillion in loans.

About the Independent Community Bankers of America
The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation's community banks through effective advocacy, education, and innovation. As local and trusted sources of credit, America's community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers' financial goals and dreams. For more information, visit ICBA's website at icba.org.

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About the American Bankers Association

The American Bankers Association is the voice of the nation's $26.1 trillion banking industry, which is composed of small, regional and large banks that together employ over 2 million people, safeguard $20.5 trillion in deposits and extend $13.7 trillion in loans.