US Banking Sector Urges Clarity on Stablecoin Interest and Profit Restrictions in Clarity Act

Following the passage of the Clarity Act by the US Senate Banking Committee, the banking sector has issued a statement urging revisions to clarify restrictions on stablecoin interest and profits, citing concerns over accelerated deposit outflows.

The American Bankers Association, Military Bankers Association, and seven other groups stated that current bill language contains loopholes allowing easy circumvention of prohibitions, potentially permitting stablecoin interest or similar payments to continue. While endorsing the need for a regulatory framework for digital asset markets under the Clarity Act, they warned that permitting stablecoin interest could lead to deposit outflows and reduced credit availability.

The current bill prohibits interest or similar incentives on stablecoins but allows rewards for trading or activity. Banking groups argue this distinction is insufficient, with loopholes enabling circumvention. They also criticized existing circuit-breaker provisions as ineffective, advocating for an outright ban on interest-like payments from the outset.

Proposed changes include removing 'solely' in section (1)(A), deleting references to 'stablecoin balance' and 'interest-bearing bank deposits' in (1)(B), and revising the economic equivalence standard to 'substantial similarity.' The banking sector also requested removal of provisions allowing digital asset service providers to offer rewards based on time, balance, or holding periods.

The groups emphasized that with these amendments, banks could continue supporting innovation while protecting their ability to supply credit to consumers, small businesses, and communities. They stressed that balancing regulation is critical for maintaining financial system resilience, stability, and global leadership.