WASHINGTON—Five banking trade groups are pushing back on proposed Senate language governing stablecoin interest and rewards payments, saying the draft “falls short” of its stated goal of preventing yield-bearing stablecoins from drawing deposits out of banks, the Bank Policy Institute reported.
The statement came from the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and the Independent Community Bankers of America.
The dispute centers on language from Sens. Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) intended to help move the CLARITY Act forward by restricting stablecoin rewards that resemble bank deposit interest, while still allowing crypto firms to offer other customer incentives. Tillis said banks had been directly involved for months and that the compromise was aimed at addressing concerns over deposit flight.
The banking groups said the proposal still leaves loopholes, including allowing exchanges and other crypto intermediaries to pay rewards through membership programs and allowing rewards to be calculated by duration, balance and tenure. They warned that those structures could still encourage consumers to hold stablecoins like yield-bearing accounts, undermining the stated prohibition.
Bloomberg Law reported the bank pushback is likely to increase pressure on lawmakers to keep negotiating over one of the most contentious provisions in the crypto market structure bill. The banking groups said they will offer lawmakers specific changes in the coming days, while continuing to support innovation that does not weaken the bank deposits used to support local lending.