The American Bankers Association (ABA), together with 77 state-level industry associations, sent a collective letter to the U.S. Senate demanding revisions to the CLARITY Act. The key sticking point is Section 404, which regulates the accrual of interest income on stablecoins. The document is dated July 13 and addressed to Majority and Minority Leaders John Thune and Chuck Schumer.

What are the complaints about Section 404?

Section 404 in its current form prohibits issuers of payment stablecoins from paying rewards similar to bank deposits for simply holding funds. Only incentives tied to activity are permitted—for example, for making transactions or using the platform. The banking community considers these formulations too narrow and creating loopholes to circumvent the ban.

The signatories propose four specific amendments:

  • Remove the word "solely" from subsection (1)(A).
  • Exclude the phrases "on the balance of a payment stablecoin" and "on an interest-bearing deposit in a bank" from subsection (1)(B).
  • Replace the criterion "economically or functionally equivalent" with "substantially similar" throughout the section.
  • Completely delete subsection (3)(B).

According to bankers, the current version is contradictory: permitted incentives could effectively nullify the adjacent ban, and vague wording encourages the creation of schemes that would replace traditional bank deposits.

Risk of deposit outflows and pressure on the Senate

The letter directly states: if stablecoins begin to generate income comparable to bank deposits, this will trigger a massive outflow of funds from local banks. Fewer deposits mean fewer resources for mortgages, small business lending, and farmers. "This is the main engine of local development," the authors emphasize.

Recall that earlier, five of the largest U.S. banking lobbies voiced a similar position. The new document details what bankers consider critical for revision. Notably, the CLARITY Act is supported by both law enforcement (represented by the NOBLE association) and former President Donald Trump, who urged senators to speed up. However, there is still no consensus on Section 404, nor on Section 604 (developer protection and ethical standards).

My analysis: The banking lobby uses the classic argument of "consumer protection and system stability," but is essentially fighting to maintain its monopoly on the deposit base. If CLARITY is passed in its current form, stablecoins will remain merely a settlement tool, stripped of investment appeal. A compromise will likely be found, but time is extremely short before the Senate's August recess—making the outcome of the vote unpredictable.