Clarity Act banks warn over the gray area surrounding stablecoin rewards

Seventy-six banking groups, led by the American Bankers Association and the Independent Community Bankers of America, urged the Senate on Monday, July 13, to amend the Clarity Act before its vote. They point to a “loophole” in section 404 that would allow platforms to pay, in the name of the reward, yields equivalent to bank interest on stablecoins.

An unexpected banking coalition knocks on the Senate’s door

A paradox deserves to be highlighted first: these groups are not demanding the withdrawal of the Clarity Act. In their letter dated July 13, they defend “responsible innovation” and a regulated digital asset market.

Their targets are neither stablecoins nor their principle, but the reward mechanism. However, this mechanism touches the heart of banking, as deposits finance mortgages, agricultural finance, and support for small businesses.

The GENIUS Act, already enacted, forbids payment stablecoin issuers from paying interest or a yield for mere holding. Section 404 of the Clarity Act, under Senate review, broadens the rule to service providers and their subsidiaries. It prohibits payments “economically or functionally equivalent” to bank interest.

Yet banks see a backdoor: a platform could add a minimal condition (transaction, loyalty) to a reward indexed on the balance, then claim an “activity” logic. The program would resemble passive yield without carrying the label.

The removal of this provision aligns with our shared goal of not encouraging the passive holding of payment stablecoins over long periods.

The Senate faces five technical amendments

The coalition demands five specific amendments to section 404, all centered on the notion of “reward.” It first wants to remove the word “solely” to prevent platforms from bypassing the ban by adding a secondary condition.

It then proposes deleting references to “stablecoin balance” and “paid bank deposit,” adopting a “substantially similar” test instead of “equivalent,” and erasing the subsection that allows rewards calculated based on balance, duration, or seniority.

This last deletion weighs the most. Interest is classically calculated on principal and time. Reproducing these variables allows fabrication of a yield disguised as points, tokens, or loyalty benefits.

Tim Scott, chair of the banking committee, and John Thune, majority leader, lead coordination for a targeted vote on July 20 before the summer recess. The Senate has eight legislative days before the August 7 break to decide.

Ethics and Wall Street’s weight renew pressure

The debate goes beyond technicality. Elizabeth Warren, Democratic senator, recalled on July 13 that without ethical safeguards, the Clarity Act would facilitate Donald Trump’s profits on his crypto activities.

Miles Jennings, legal director at a16z crypto, countered that the text precisely creates new safeguards. Jamie Dimon, JPMorgan boss, judged that the law might allow platforms to offer deposit-like yields without corresponding banking oversight.

In short, the Clarity Act now faces two fronts. On one side, banks demand closing a technical loophole in section 404 before August 7. On the other, Democrats condition their vote on ethical rules, while Wall Street pushes for revisions.

Without the support of nine opposition senators, the text remains blocked. The July window is the last real chance for American crypto regulation before the midterm elections.