The American Bankers Association (ABA), together with the Independent Community Bankers of America (ICBA) and 76 other state-level industry associations, sent a collective letter to the Senate demanding substantial revisions to the CLARITY bill. The key sticking point is Section 404, which regulates the yield on stablecoins.

The document, dated July 13, is addressed to Senate Majority and Minority Leaders John Thune and Chuck Schumer. Bankers insist that the current version of Section 404 poses risks to the traditional banking system and requires adjustments.

What exactly bothers bankers about Section 404?

Section 404 in its current form prohibits issuers of payment stablecoins from paying rewards or accruing income similar to bank deposit interest solely for holding funds. Only incentives related to active use are permitted — for example, for making transactions or interacting with the platform.

The banking associations propose four specific amendments:

  • Remove the word "solely" from subsection (1)(A) to avoid creating a narrow loophole for circumventing the ban.
  • Exclude the phrases "on the balance of a payment stablecoin" and "on an interest-bearing deposit in a bank" from subsection (1)(B), as they create ambiguity.
  • Replace the criterion "economically or functionally equivalent" with "substantially similar" throughout the text of the section — this, in their opinion, would make the regulation clearer and less susceptible to legal manipulation.
  • Completely remove subsection (3)(B), which, bankers believe, contradicts the adjacent prohibition and creates an internal conflict within the law.

Essentially, bankers fear that vague wording will allow stablecoin issuers to disguise deposit-like interest as "activity incentives," effectively circumventing Congress's original intent. They emphasize: payment stablecoins should remain a settlement tool, not a store of value.

The real threat of deposit outflows

The main argument of the banking community is the threat to the stability of local banks and, consequently, the entire economy. Deposits in regional banks are the primary source of funds for mortgage lending, supporting small businesses, and farmers. The more funds flow out of the banking system into yield-bearing stablecoins, the less money remains for lending to the real economy.

This is not the first attempt by the banking lobby to influence CLARITY. Previously, five of the largest U.S. banking associations took a similar stance. However, the new letter analyzes in much greater detail the specific wording that bankers consider critical.

Notably, the bill is supported by both law enforcement (the FLEOA association) and Donald Trump himself, who urged senators to speed up. However, the issue of stablecoin yield remains one of the three main reasons why CLARITY has not yet been passed. Time is running out: there is very little left before the Senate's August recess, and whether lawmakers will manage to agree on all contentious points is a big question.

Expert opinion: The banking lobby in the U.S. demonstrates surprising flexibility: while formally supporting innovation, it proposes amendments that could effectively "emasculate" the law, stripping stablecoins of their main competitive advantage over traditional finance. If Section 404 is adopted in the bankers' version, the market for yield-bearing stablecoins in the U.S. risks remaining in its infancy, and issuers will migrate to more favorable jurisdictions.