While the CLARITY Act appears to be on track for a markup hearing before the Senate Banking Committee this Thursday, banking industry representatives continue to complain about the stablecoin yield compromise recently hashed out by various policymakers.
In a joint statement last week, banking associations and lobbyists worried that “payment stablecoin yield, or incentives that act like yield, can reduce U.S. deposits and, in turn, banks’ capacity to extend credit across the country.”
While the fear of deposit flight is unproven and something banks can easily mitigate by raising deposit rates, the banking industry continues to take an alarmist approach as it seeks to create a regulatory moat to protect its business.
This past weekend, it was posted on X that the American Bankers Association (ABA) issued a call to arms to fight against the compromise of allowing stablecoin rewards. ABA CEO Rob Nichols called on bank executives to reach out to their representatives and Senators to “close this loophole” before the legislation moves forward. Nichols said he was of the opinion that members are not fully aware of the risks to the economy if action is not taken.
“…we want Congress to put in place digital asset rules and establish responsible guardrails for the crypto industry. The current version of the legislation, although improved from an earlier version, still does not adequately prevent crypto companies from offering interest-like rewards on payment stablecoins. Without additional changes, we believe the current proposal would unnecessarily incentivize the flight of bank deposits,” stated Nichols.
Earlier today, Patrick Witt, Executive Director of the President’s Council of Advisors on Digital Assets, who is leading the charge from the White House, shared on X that Nichols and others were invited to the White House in February to discuss the compromise. Apparently, the bank representatives were not available.
Coinbase Chief Legal Officer Paul Grewal commented that banks have already had “idle yield killed,” a clear loss for consumers but a big win for banks.
“Take yes for [an] answer. Move on. Stop wasting the time of the Senate and the American people,” said Grewal.
It is unclear whether the ABA’s pleas to stop stablecoin rewards will garner sufficient support from members of Congress to further delay the CLARITY Act.
Ohio Senator Bernie Moreno, a pro-digital asset member of Congress, said that on Mother’s Day, the CEO of the ABA sent a frantic alert to every bank CEO in the country, demanding help to kill the legislation.
Moreno explained:
“This line in the [ABA] letter sticks out: “we believe committee members may not be fully aware of the risks to the economy by the stablecoin loophole.” That’s both intellectually dishonest and simultaneously demeaning. First, there is no “loophole.” This entire issue was litigated during the GENIUS Act debate.
Moreno said that stablecoins could break the banking monopoly, but banks are using unwarranted fear to get the legislation changed.
“As a member of that committee, my message is clear: Hands off the people’s money. Let Americans choose real competition and better returns. No more shielding Wall Street from the future. The banking elite’s days of rigging the system and debanking their political enemies are over. Innovation, freedom, and the American people will win. I’m voting to break the cartel,” stated Moreno.
While banks say they are supportive of innovation, that support only applies if they crush the competition that could offer a superior service to what banks offer today.