78 U.S. banking associations demand a revision of Section 404 of the CLARITY bill
The American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), and 76 other industry associations sent a collective letter to the Senate demanding revisions to a key section of the CLARITY bill. The document, dated July 13, is addressed to Majority and Minority Leaders John Thune and Chuck Schumer. The main focus of criticism is Section 404, which regulates stablecoin yield.
What is the essence of the dispute over stablecoin yield
Section 404 in its current form prohibits issuers of payment stablecoins from paying rewards for the mere holding of assets or accruing interest similar to bank deposits. Only incentives tied to user activity—such as conducting transactions or using the platform—remain permitted. The banking community insists on substantial adjustments to these provisions.
The signatories propose four key amendments. First, remove the word "solely" from subsection (1)(A). Second, eliminate the phrases "on the balance of a payment stablecoin" and "on an interest-bearing deposit in a bank" from subsection (1)(B). Third, replace the criterion "economically or functionally equivalent" with "substantially similar" throughout the section. And finally, completely delete subsection (3)(B).
According to bankers, the current wording creates loopholes to bypass the ban through additional incentives, while the permitted clause on rewards directly contradicts the adjacent prohibition. This is not just a legal quibble—it is a fundamental threat to the banking model of attracting liquidity.
The real risk of deposit outflows
The letter explicitly states: the ambiguity of the draft could encourage the creation of stablecoin schemes that effectively replace bank deposits. Congress initially stated that payment stablecoins are a tool for settlements, not a store of value, but the current version of Section 404 blurs this boundary.
Banking associations warn: the fewer deposits in local banks, the less funding available for mortgages, small business loans, and farmers. And bank lending is the main driver of local development. The threat of deposit outflows is quite real, and this is understood not only by lobbyists but also by lawmakers themselves.
Earlier, five leading U.S. banking lobby groups had already voiced a similar position, but the new letter details precisely those aspects that bankers consider critical. The CLARITY bill, I remind you, has still not been passed—and one of the three main reasons is precisely the dispute over stablecoin yield. Moreover, there is no consensus on Section 604, which concerns developer protection and ethical standards.
Donald Trump urged senators to speed up, and the bill was supported by NOBLE and the Federal Law Enforcement Officers Association—despite sharp disagreements. The Senate has very little time left before the August recess. Will lawmakers manage to align their positions on stablecoins, developers, and ethics? For now, that is a big question.
Expert opinion: The banking lobby demonstrates remarkable unity—78 associations speaking in unison. This is a signal to the market: stablecoin regulation in the U.S. will drag on, and a compromise will not be reached before autumn. Investors should consider that uncertainty in this segment will persist at least until September.