CLARITY Act heads for Senate vote as stablecoins become the new bank-deposit battleground
- Banking groups are pressing senators to tighten stablecoin reward rules, warning that yield-like incentives could pull deposits away from banks and reduce lending.
- The revised CLARITY Act still allows some transaction-based rewards while adding a regulatory “circuit breaker” if stablecoins significantly harm community-bank deposits.
- The bill faces a key September 15 procedural vote and needs 60 votes to advance, with stablecoin rewards remaining one of its biggest unresolved disputes.
The dispute regarding the CLARITY Act has become a straightforward question: will Americans choose to keep their cash in banks or will they use dollar-pegged stablecoins with promising rewards?
Before the Tuesday Senate vote, eight banking organizations requested that lawmakers to establish stricter regulations regarding incentives for using stablecoins. Their position is simple: when deposits leave the banks, they lose a reliable and inexpensive source of funding and availability of cash.
The importance of this question arises from the fact that banks use deposits to provide loans. In May, Cryptopolitan wrote that in the U.S. banks use about 80% of deposits to finance loans; therefore, the matter of stablecoin incentives becomes the matter of both funding costs and control of dollar-based payments.
Why holding tokens instead of cash is the whole ballgame
Stablecoins are made to mimic such assets as the dollar. According to a paper published by BIS, almost 98% of stablecoins are valued in dollars. IMF says that the value of the market is about $300 billion in August.
The 2025 GENIUS Act prevents the issuers of stablecoins from providing interest or yield directly. The analysis from the White House showed that the legislation does not explicitly ban distribution of rewards by affiliates and other third parties. The CLARITY Act could determine how much room those arrangements have to continue.
What the banks want struck from the text
In a letter released on Monday addressed to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer, banking groups said they could not back the latest rewards proposal.
They also urged the Senate to eliminate the word “solely” from the definition of payment based on holding, to replace the phrase “economically or functionally equivalent” with the word phrase “substantially similar”, and to remove references to rewards being based on balance, duration or time in business.
Organizations that put their name to the letter also include the American Bankers Association, Bank Policy Institute, and Independent Community Bankers of America, among others. The letter comes after 80 state bankers’ associations joined calls for stricter language on September 10, according to the ABA Banking Journal.
The government’s own math undercuts the panic
The White House Council of Economic Advisers (CEA) came up with a significantly lower estimate of possible damage to lending.
Its April study indicated that banning the stablecoin yield would boost the level of lending by banks by only $2.1 billion, being equal to 0.02%, while creating a net welfare loss of $800 million. Lending of the community banks would increase by approximately $500 million.
Even in the case of nearly unrealistic assumptions that the CEA mentioned, including stablecoin usage of around six times higher than today’s and transformation of the Fed’s monetary policy, the increase in bank lending is estimated at only 4.4%.
What changed since the May draft
The updated legislation issued on Sunday has 126 significant amendments sought by the Democrats, as reported by Reuters.
The bill tightens rules governing how public figures can benefit from cryptocurrencies and grants state attorneys general significant powers regarding law enforcement in this area. Senator Cynthia Lummis stated that the bill is now ready to go ahead, while Senator Elizabeth Warren’s staff described the changes dealing with ethics as “empty.”
The bill requires 60 votes to pass the cloture rule on Tuesday.
Why the bank-versus-crypto framing is too simple
The industry split is not so clear-cut. According to Cryptopolitan, Goldman Sachs, BNY and Morgan Stanley supported the legislation, defying retail-oriented banking groups.
Meanwhile, community banks are not necessarily rejecting stablecoins. Moov’s community bank and credit union network of over 1,000 institutions is able to utilize stablecoin payment technology provided by Coinbase.
This impact goes further than the banking industry of the U.S. The BIS cautions that the use of dollar-pegged stablecoins widely may promote digital dollarization in emerging economies, while the IMF informs that even small-scale use of stablecoins may compel old-fashioned financial firms to up their game in terms of competition in costs and efficiency.
Therefore, the vote on Tuesday is not merely a disagreement about deposits, but rather a battle for who will take control of the next phase of dollar payments.
| Issue | May Senate Banking version | Sept. 14 final text |
|---|---|---|
| Passive stablecoin yield | Prohibited | Still prohibited |
| Activity/transaction rewards | Permitted | Explicitly permitted |
| Rewards that function like bank interest | Prohibited | Prohibited |
| Treasury role | No special deposit “circuit breaker” in the May summary | Treasury gets a new circuit-breaker mechanism |
| Community banks | General concern over deposit competition | Explicitly protected through the circuit breaker |
| Measurement of deposit impact | No comparable detailed mechanism | Federal agencies must study deposit flows and lending effects |
| Marketing stablecoins as deposits | Restricted | Explicitly prohibited |
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FAQs
When is the Senate voting on the CLARITY Act
A procedural vote to invoke cloture on the motion to proceed is scheduled for Tuesday, September 15, and it needs 60 votes to advance, according to Reuters and The Banker.
What specific changes do the banks want?
They want lawmakers to delete "solely" from a restriction on rewards for holding stablecoins, replace an equivalence standard with a broader "substantially similar" test, and remove language allowing rewards tied to a customer's balance, duration or tenure, Decrypt reported.
Would banning stablecoin yield actually protect bank lending?
The White House Council of Economic Advisers estimated in April that a full yield ban would raise bank lending by only about $2.1 billion, or 0.02%, suggesting the effect on lending is minimal.
What are the 8 banks who sent the joint letter asking for tightening or the stablecoin-reward rules?
The eight banking trade groups are:
American Bankers Association (ABA)
Association of Military Banks of America (AMBA)
Bank Policy Institute (BPI)
Consumer Bankers Association (CBA)
Financial Services Forum (FSF)
Independent Community Bankers of America (ICBA)
Mid-Size Bank Coalition of America (MSBCA)
National Bankers Association (NBA)
Why do the 8 banks want to remove “solely” from Section 10404(c)(1)(A)?
The groups argue that leaving the word “solely” creates a potential loophole for rewards that are ostensibly connected to transactions but economically reward simply holding stablecoins.
Why are the 8 banking groups asking to replace the “economically or functionally equivalent” test with a “substantially similar” test?
Their argument is that the latter would make it harder to structure a reward that technically avoids the prohibition while still behaving like bank-deposit interest.
Why are the 8 banking groups asking to delete Section 10404(3)(B)?
This is arguably their most interesting objection. The provision allows otherwise permissible rewards to be calculated according to “balance, duration, tenure, or any combination” of those factors.
The banking groups say that is contradictory because interest payments are themselves commonly calculated according to balance and duration. They argue that the provision could therefore encourage customers to hold stablecoins for longer periods rather than use them as payment instruments.
Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.
Micah Abiodun
Micah Abiodun makes good use of his Environmental Engineering and Management (MSc) at Tallinn University of Technology (TalTech) to polish content and price prediction news at Cryptopolitan. Now on his 7th year in the crypto media space, he covers major cryptos, altcoins, DeFi, stablecoins, macro trends, and emerging tech.​​​​​​​​​​​​​​
