The moment of truth has arrived for the CLARITY Act, which is currently under consideration in the U.S. Senate. The American Bankers Association (ABA), together with the Independent Community Bankers of America and 76 other state-level industry associations, sent a letter to Senators John Thune and Chuck Schumer with specific proposals for revisions. The main target is Section 404, which regulates stablecoin yield.
At first glance, Section 404 seems reasonable: it prohibits payment stablecoin issuers from paying rewards simply for holding assets, analogous to bank deposits. Only incentives tied to activity—transactions or platform usage—are permitted. However, the banking community sees serious risks in this and proposes specific amendments.
What exactly are bankers seeking?
The proposed amendments are quite specific. The associations demand removing the word "solely" from subsection (1)(A), excluding the phrases "on the balance sheet of a payment stablecoin" and "on an interest-bearing deposit at a bank" from (1)(B), replacing the criterion "economically or functionally equivalent" with "substantially similar" throughout the section, and completely deleting subsection (3)(B).
According to bankers, the current wording creates loopholes for circumventing the ban through additional incentives and is internally contradictory. They fear that the law's ambiguity could encourage schemes that effectively replace bank deposits, even though Congress initially stated that stablecoins are a tool for payments, not a store of value.
The real threat of deposit outflows
Behind this technical dispute lies a fundamental problem: banks fear losing the deposit base that fuels local economies. These funds go toward mortgages, small business loans, and agricultural lending. The fewer deposits in local banks, the less money available for regional development.
This is not the first attempt by the banking lobby to influence the bill. Earlier, five leading U.S. banking lobbies took a similar stance. But the new letter represents a much more detailed and coordinated attack on Section 404.
It is worth noting that the CLARITY Act is supported by law enforcement agencies (the NOBLE association) and Donald Trump himself, who urged senators to speed up the process. However, there is very little time left before the August recess. Whether lawmakers will manage to reach an agreement on stablecoins, developers, and ethical standards remains a big question.
My analysis: The banking lobby is demonstrating remarkable unity, and this is a serious signal for the market. Section 404 in its current form indeed creates uncertainty that could stall the law's passage. If amendments are not made, we risk getting either a heavily watered-down version of CLARITY or yet another delay, which would negatively impact the entire stablecoin sector.