Stablecoins: Banks Refuse to Compromise on Yields

Stablecoins find themselves at the center of a new showdown between community banks and the crypto sector. Today, in the United States, the review of the CLARITY Act reignites opposition around the yields associated with these digital assets. The Independent Community Bankers of America demands a complete ban on rewards linked to these assets. Its leader Rebeca Romero Rainey rejects the idea of a compromise on this issue. At the same time, banks warn of a possible massive transfer of deposits to digital assets in this debate.

Stablecoins rekindle the debate around the CLARITY Act

The CLARITY Act faces a new challenge after a compromise among crypto actors. The discussions had limited remuneration linked to stablecoins to certain activities. However, community banks contest this approach. They demand that rewards be fully regulated before any progress. This disagreement still blocks the text. Banks want to clarify the situation.

The Independent Community Bankers of America represents about 5,000 American community banks. The association believes the text could affect their operation and local credit. This demand thus broadens the conflict.

Rebeca Romero Rainey, leader of the ICBA, defends a firm position. In an interview with Banking Dive, she believes the loophole around rewards must completely disappear.

We keep hearing the same suggestion: “How to satisfy both parties on this issue?” For us, this loophole must be fully closed. There is no possible compromise in terms of resolution.

Rebeca Romero Rainey, leader of the ICBA. Source: Banking Dive,

According to her, a compromise does not address the main concern. This position hardens the debate around stablecoins and complicates finding an agreement. The financial risk structures their argument.

Banks fear a deposit outflow

For the ICBA, the main risk concerns deposits held within the banking system. Rebeca Romero Rainey estimates that “$1.3 trillion could move to stablecoins if the legislative framework changed.” According to her estimate, this movement could cause an $850 billion decrease in local loans. This fear now weighs on discussions.

The ICBA leader also highlights the lack of guarantee regarding a return of these funds to local communities. She believes that cryptocurrencies would not automatically replace the deposits lost by banks. The association therefore calls for consideration of this risk. Concerned senators strengthen this opposition.

Nothing guarantees that cryptocurrencies would replace these deposits and reinvest them in local communities. Such opposition has caught the attention of several senators. If data shows, especially in our many rural areas, that we will have no alternative to this capital, it is imperative to find a solution.

Rebeca Romero Rainey, leader of the ICBA. Source: Banking Dive,

This concern has already found political echoes. Community banks would have convinced Josh Hawley and Jerry Moran to oppose the CLARITY Act in its current form. The question of yields thus goes beyond the banking sector alone. The debate remains particularly sensitive.

A pressured vote and opposing positions

Rebeca Romero Rainey also criticizes a report from the White House Council of Economic Advisors. Titled “Effects of banning stablecoin yields on bank lending,” this document, according to her, downplays fears related to deposit outflow. She maintains that the consequences could differ. This divergence further weakens the parliamentary timetable. She maintains that the consequences could differ. This divergence further weakens the parliamentary schedule.

The Senate will meet on September 15 to vote on the CLARITY Act. However, it seems unlikely that at least 60 senators will agree to move the text forward. Without this support, the project could be abandoned. Each side defends its interests here.

The outcome therefore depends on the ability of different actors to resolve this disagreement. Community banks demand a total ban on rewards linked to stablecoins. A compromise had emerged around limiting remuneration to certain activities. The debate thus concerns digital innovation, deposits, and local financing.

The next steps will show whether this opposition can evolve before the text is reviewed. Deposit protection remains at the heart of the banking file. For the crypto sector, the chosen wording will determine the conditions applicable to stablecoins.