ABA, ICBA join state associations in urging Senate to strengthen stablecoin yield provisions in Clarity Act

In a joint letter to Senate leaders, the American Bankers Association, the Independent Community Bankers of America and 76 state associations representing thousands of community financial institutions across the US expressed genuine concern about the Clarity Act and called for targeted changes to ensure greater certainty that stablecoins cannot function as a substitute for bank deposits.

In a letterassociations expressed support for responsible innovation and a well-regulated digital asset market, while stressing the need for clear and enforceable safeguards around stablecoin interest, yield, and reward programs. They noted that collaboration with legislators and regulators has led to significant improvements in legislation, including efforts to address industry concerns.

“At the same time, significant questions remain about whether the current language in Section 404 provides enough clarity and certainty to achieve that goal,” the associations said. “Specifically, we remain concerned that ambiguities within the bill could encourage stablecoin arrangements to effectively function as substitutes for deposits, despite Congress’ long-standing and clearly expressed intent that stablecoins should serve as transaction tools, not store-of-value products.”

Possible fixes

To address the concerns, the associations called for targeted revisions to Section 404 that would clarify the interest and yield prohibition and help ensure that the prohibition cannot be circumvented by alternative incentive structures. They also urged lawmakers to replace the draft’s “functionally and economically equivalent” standard with a “substantially similar” standard and to remove language they believe could create ambiguity regarding rewards tied to stablecoin balance, duration or tenure.

“The removal of this provision is consistent with our shared goal of not encouraging the inactive holding of stablecoins for payment for extended periods of time,” the associations said. “Retaining this section would negate the goals of the advance ban (to deter deposit outflows) while tying rewards directly to how much and how long users hold stablecoins for payment in wallets or exchanges.”

The groups urged senators to strengthen the legislation before final passage by incorporating proposed changes and providing greater certainty that incentives related to holding, holding or balance of payments stablecoins cannot be used in ways that undermine the intent of Congress.

“Clarification of these provisions would help establish a permanent rules of the road, support responsible innovation, and provide the clearest path to achieving the goal set forth by Congress while reducing the risk of unintended consequences for consumers and communities,” they said.

The associations concluded by reaffirming their commitment to constructive cooperation with policy makers to solve the problem.