The largest banking lobbies in the U.S., including the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA), along with 76 state industry associations, have sent a letter to the Senate demanding revisions to a key section of the CLARITY Act. The document, dated July 13, is addressed to Majority and Minority Leaders John Thune and Chuck Schumer. The main point of contention is Section 404, which regulates the yield on stablecoins.
What's Wrong with Section 404?
The current version of the section prohibits issuers of payment stablecoins from paying rewards or accruing income similar to bank deposits solely for holding assets. Only incentives tied to activity are permitted—for example, for conducting transactions. However, bankers see serious risks in this wording.
In their letter, the 78 associations propose specific amendments: remove the word "solely" from subsection (1)(A), eliminate the phrases "on the balance sheet of a payment stablecoin" and "on an interest-bearing deposit in a bank" from (1)(B), replace the criterion "economically or functionally equivalent" with "substantially similar" throughout the text, and completely delete subsection (3)(B).
According to the signatories, the current wording creates loopholes to bypass the ban through additional incentives and contradicts other provisions of the bill. Banks fear that the ambiguity of Section 404 could encourage the creation of stablecoin schemes that effectively replace bank deposits—even though Congress initially stated that these instruments should serve as a means of payment, not savings.
Real Threat: Deposit Outflow and Economic Impact
Banking associations warn: the fewer deposits remain in local banks, the less funding will go toward mortgages, support for small businesses, and farmers. This is a direct blow to lending—the main driver of regional development. Previously, five leading U.S. banking lobbies had already taken a similar stance, but the new document delves specifically into the aspects that bankers consider critical for revision.
Notably, the CLARITY Act is supported not only by bankers. Donald Trump has urged senators to speed up, and the federal law enforcement association NOBLE has also voiced support for the document, despite the intense debates surrounding it. However, there is very little time left before the Senate's August recess. Whether lawmakers will manage to reach an agreement on stablecoins, developers, and ethical standards remains a big question.
Expert Opinion: Judging by the scale of pressure from the banking sector, Section 404 in its current form indeed poses risks to the traditional financial system. However, completely removing restrictions could set a precedent where stablecoins begin to compete directly with deposits—and this is already a matter not only of regulation but also of macroeconomic stability. A compromise will likely be found, but probably not before August.