Banks want "solely" struck from the CLARITY Act before Tuesday's cloture vote
Eight trade groups told Senate leaders the bill's rewards carve-outs would let stablecoins pay interest by another name. The White House's own April study puts the lending at stake at $2.1 billion, or 0.02%.
The Investor · Invest desk
What happened
- Eight banking trade groups, among them the American Bankers Association, the Bank Policy Institute and the Independent Community Bankers of America, told John Thune and Chuck Schumer on Monday they could not support the CLARITY Act's revised stablecoin rewards text.
- The bill faces a Senate procedural vote on September 15 and needs 60 votes to advance.
- The revised bill keeps some transaction-based rewards and adds a regulatory circuit breaker that engages if stablecoins significantly harm community-bank deposits.
- The groups asked senators to strike "solely" from the restriction on payments tied to holding stablecoins, swap the equivalence test for "substantially similar", and delete the subsection permitting rewards based on balance, duration or tenure.
Why it matters
- What doesn't add up contradiction Senators are pricing an unquantified risk against a quantified small one: the banks predict deposit flight without putting a figure on the outflows, and the White House's own study values the whole lending gain from a full ban at 0.02%.
- What it limits constraint A circuit breaker shifts the burden of proof onto supervisors, who would have to demonstrate harm to community-bank deposits has already happened before they can restrict rewards.
- Who's exposed exposure Replacing the equivalence standard with "substantially similar" would reach reward programmes run by affiliates and other third parties even where the issuer never makes the payment.
- Who has to decide decision The split among lenders leaves each senator choosing between community bankers at home and the wholesale banks that backed the bill.
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A word carries this much weight because the 2025 GENIUS Act already stops stablecoin issuers from paying interest or yield directly. The White House's analysis found the statute does not explicitly bar affiliates and other third parties from distributing rewards [14][15]. What the CLARITY text decides is how much room those arrangements keep [26]. "We support this distinction in principle, although we believe that the way the current legislative text is drafted provides loopholes and avenues for the prohibition to be easily evaded that would still allow interest and interest-like payments to be made on stablecoin balances," the groups wrote [12].
Their objection to the carve-out is mechanical. "Given that interest payments are often calculated by reference to duration, balance and tenure, this subsection appears to contradict the initial prohibition," the groups wrote [7]. On the safeguard the drafters added instead, they wrote that "a circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all" [8]. The letter renews demands six banking trade groups made in May, and eighty state bankers' associations joined the call for tighter language on September 10, according to the ABA Banking Journal [11][10].
The money does move the way the banks describe. Deposits fund loans, and Cryptopolitan reported in May that US banks use about 80% of deposits to finance lending, so the money that leaves a deposit account is money not lent against mortgages, farms and small businesses [20][25]. What they dispute is how big it is. The White House Council of Economic Advisers estimated in April that banning stablecoin yield outright would raise bank lending by $2.1 billion, or 0.02%, alongside a net welfare loss of $800 million [16]. A $2.1 billion gain worth 0.02% implies a lending base near $10.5 trillion [27]. Community banks, the constituency the circuit breaker is written for, would get about $500 million of that, a shade under a quarter [17][28]. Set against the roughly $300 billion stablecoin market the IMF counted in August, the entire lending gain is 0.7% [19][30].
The banks are not arguing from that base case. The CEA also ran assumptions it described as nearly unrealistic, including stablecoin usage about six times today's and a transformation of Fed monetary policy. That run produced a 4.4% increase in bank lending, 220 times the base estimate [18][29].
The revised text released Sunday carries 126 significant amendments sought by Democrats, according to Reuters [21]. Senator Cynthia Lummis said the bill is now ready to advance, while Senator Elizabeth Warren's staff called the ethics changes "empty" [22][23]. Goldman Sachs, BNY and Morgan Stanley backed the legislation, according to Cryptopolitan, against the retail-facing trade groups [24].
If the rewards language survives to passage, the circuit breaker becomes the operative protection, and the argument moves from statutory drafting to whatever supervisors decide significant harm to community-bank deposits means [3]. If cloture fails, the "substantially similar" test is the cheapest concession available to the drafters [5]. In my view the banks lose the wording and keep the trigger. A $2.1 billion lending gain will not carry an up-front prohibition, and the letter gives no estimate of potential outflows and no evidence that the predicted lending reductions have happened [16][13]. What would overturn that: community-bank deposit balances falling measurably while third-party reward programmes scale, before any regulator has grounds to act.
What to watch
- The cloture tally on Tuesday, and whether the rewards subsection is reopened for floor amendment if the count falls short.
- Whether the ABA, BPI and ICBA move from opposition to support if "solely" and the balance-duration-tenure language are struck.
- Community-bank deposit growth data, which is the only evidence that would settle whether the CEA's 0.02% or the banks' warning is the better estimate.
Information, not investment advice. This story is general information about companies and markets, drawn from cited reporting. It is not a recommendation to buy, sell or hold any security; check the cited sources before acting.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence62
- Adoption38
- Hype gap+32
- Incentives80
- Confidence65
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
Eight banking trade groups wrote to Senate Majority Leader John Thune and Senate Minority Leader Chuck Schumer on Monday urging tighter restrictions on the CLARITY Act's stablecoin rewards provisions, saying they could not support the latest revisions.
- [2]
The CLARITY Act faces a key Senate procedural vote on September 15 and needs 60 votes to advance.
- [3]
The revised CLARITY Act still allows some transaction-based rewards while adding a regulatory circuit breaker if stablecoins significantly harm community-bank deposits.
- [4]
The groups asked the Senate to remove the word "solely" from the restriction on payments connected with holding stablecoins.
- [5]
The groups asked to replace the "economically or functionally equivalent" standard with a "substantially similar" test, broadening the restriction to capture incentives that resemble deposit interest.
- [6]
The groups asked to delete language allowing otherwise permissible rewards to depend on a customer's balance, duration or tenure.
- [7]
"Given that interest payments are often calculated by reference to duration, balance and tenure, this subsection appears to contradict the initial prohibition," the groups wrote.
- [8]
"A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all," the group wrote.
- [9]
Signatories to the letter include the American Bankers Association, the Bank Policy Institute and the Independent Community Bankers of America, representing large banks and community lenders.
- [10]
The letter follows 80 state bankers' associations joining calls for stricter language on September 10, according to the ABA Banking Journal.
- [11]
The letter renewed demands made by six banking trade groups in May, including restrictions on rewards tied to account balances and adoption of a "substantially similar" standard.
- [12]
"We support this distinction in principle, although we believe that the way the current legislative text is drafted provides loopholes and avenues for the prohibition to be easily evaded that would still allow interest and interest-like payments to be made on stablecoin balances," the group wrote.
- [13]
The letter provides no estimate of potential outflows or evidence that the predicted lending reductions have occurred.
- [14]
The 2025 GENIUS Act prevents stablecoin issuers from providing interest or yield directly.
- [15]
White House analysis showed the GENIUS Act does not explicitly ban the distribution of rewards by affiliates and other third parties.
- [16]
The White House Council of Economic Advisers estimated in April that banning stablecoin yield would boost bank lending by only $2.1 billion, equal to 0.02%, while creating a net welfare loss of $800 million.
- [17]
The CEA estimated community bank lending would increase by approximately $500 million.
- [18]
Under assumptions the CEA described as nearly unrealistic, including stablecoin usage around six times today's and a transformation of Fed monetary policy, the increase in bank lending is estimated at 4.4%.
- [19]
The IMF says the stablecoin market was worth about $300 billion in August.
- [20]
Cryptopolitan reported in May that US banks use about 80% of deposits to finance loans.
- [21]
The updated legislation issued on Sunday contains 126 significant amendments sought by Democrats, as reported by Reuters.
- [22]
Senator Cynthia Lummis stated that the bill is now ready to go ahead.
- [23]
Senator Elizabeth Warren's staff described the bill's ethics changes as "empty".
- [24]
Goldman Sachs, BNY and Morgan Stanley supported the legislation, defying retail-oriented banking groups, according to Cryptopolitan.
- [25]
Banks argue the incentives could attract money they otherwise use to fund mortgages, farms and small businesses, and the letter says community and mission-driven lenders could be particularly exposed.
- [26]
The CLARITY Act could determine how much room third-party and affiliate reward arrangements have to continue.
- [27]
A $2.1 billion lending gain equal to 0.02% implies a lending base of about $10.5 trillion.
- [28]
The $500 million community bank share is about 24% of the $2.1 billion total lending gain.
- [29]
The CEA's extreme-scenario 4.4% lending increase is 220 times its base estimate of 0.02%.
- [30]
The $2.1 billion lending gain equals about 0.7% of the roughly $300 billion stablecoin market.
Sources
2 independent publishers whose own reporting we read for this story.
- cryptopolitan.comUS banks push Senate to tighten stablecoin rewards rules before CLARITY vote
1 article · September 14, 2026
- decrypt.coBanks Want More: Trade Groups Demand Stricter Stablecoin Limits in Clarity Act
1 article · September 14, 2026
Topics and entities
Topics
- US Crypto Market Structure Legislation
- Stablecoin Regulation
- Bank Deposit Funding
- Stablecoin Yield and Rewards
Entities
- Chuck Schumer
- Goldman Sachs
- Cynthia Lummis
- Bank Policy Institute
- Elizabeth Warren
- BNY
- American Bankers Association
- International Monetary Fund
- Independent Community Bankers of America
- White House Council of Economic Advisers
- John Thune
- Morgan Stanley
- CLARITY Act
- Bank for International Settlements
- Coinbase
- GENIUS Act