Major US banking groups are raising concerns about the proposed CLARITY Act, warning that the latest version still leaves dangerous gaps that could trigger a massive migration of funds from traditional bank deposits into stablecoins. In a joint statement, the American Bankers Association and the Banking Policy Institute said the current draft's restrictions on stablecoin yields do not go far enough to protect the financial system.
The core dispute is whether stablecoin issuers should be permitted to offer anything resembling interest. Banking groups argue that even loosely defined "rewards" or activity-based incentives could effectively replicate deposit yields, drawing trillions of dollars away from banks. Research cited by the groups suggests such a shift could severely constrain lending, potentially reducing consumer and small-business lending by as much as 20%.
While the CLARITY Act aimed to prohibit direct interest payments, banks warn that Section 404 creates a regulatory loophole, allowing crypto platforms to structure incentives that sidestep oversight. "This is a significant loophole that must be addressed," the coalition stated, announcing plans to submit amendments.
The controversy has already slowed the bill's momentum, threatening its passage before the November 2026 midterm elections. Meanwhile, crypto firms like Coinbase are pushing for swift debate in the Senate. Internationally, a European banking consortium including UniCredit and ING has moved to launch its own stablecoin under new EU frameworks, illustrating a contrasting collaborative approach.
Economist Andrew Nigrinis warned that deposit migration could drain funding for consumer, small-business, and agricultural loans. However, White House economists have offered a more tempered assessment, estimating that restricting stablecoin yields would only marginally increase bank lending. The disagreement underscores the high stakes as regulators struggle to balance competition and stability.
