The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America issued a shared comment on the language regarding the compromise on stablecoin yield. This is the single biggest hurdle for the passage of the CLARITY Act, crypto market infrastructure legislation.
The banking groups said the language falls short and want to change what policymakers have agreed to. The statement declares:
“Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal – prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal. It is imperative that Congress get this right. Research demonstrates that yield-earning stablecoins could reduce all consumer, small-business, and farm loans by one-fifth or more, making it essential for the prohibition to be clear and transparent.”
“We will be sharing our detailed suggestions for strengthening the proposed language with lawmakers in the coming days, and we will continue to work in good faith to help Congress embrace innovation while protecting the deposits that drive local lending and economic activity in their communities.”
While legacy banks claim that stablecoin yields would put pressure on bank loans, this is false. What stablecoin yield would do is compel banks to become more competitive by providing better services to their customers, including individuals and businesses. Today, many bank deposit holders earn little or no interest at all. What banks truly fear is a decline in profit.
While the compromise language has disappointed some in the crypto sector for paying too much homage to legacy banks, the leading voice, Coinbase (NASDAQ:COIN), has already acknowledged it will accept the language as released, according to multiple reports.
It is currently unclear if elected officials will bend to the will of legacy banks and adjust the proposed language, which has yet to be fully revealed. How the US regulates crypto firms, including stablecoins and yield, will guide the rest of the world so the legislation is very important.
Expectations are for the bill to move to markup in the Senate Banking Committee this coming week. The banks say they are working on language to add balance to the bill. More details will be available soon.