America’s largest banking trade groups are pushing back on newly proposed language in the CLARITY Act focused on stablecoin “yield,” arguing it still does not adequately protect bank deposits.

In a joint statement referenced by Cointelegraph, the American Bankers Association (ABA) and other major groups said Senators Thom Tillis and Angela Alsobrooks are pursuing the right policy objective—preventing stablecoins from functioning like bank deposits—but that the draft language “falls short” of achieving that goal.

Stablecoin yield has become a key sticking point

The conflict centers on whether stablecoin issuers or crypto platforms should be able to offer rewards that resemble interest. Banking groups have warned that, at scale, stablecoin adoption could pull significant deposits out of the traditional banking system—particularly from smaller institutions with less balance-sheet flexibility.

Cointelegraph reported that the yield debate has delayed progress on the bipartisan legislation and raised concerns that the bill could fail to reach the finish line before the US midterm elections in November 2026.

Banks cite a potential lending impact

In their critique, banking groups pointed to analysis suggesting that deposit outflows driven by stablecoin yield could materially reduce lending capacity across consumer, small-business, and agricultural credit. They argued that the prohibition must be “clear and transparent” to prevent workarounds that recreate bank-like interest outside established regulatory frameworks.

White House economists, however, have suggested that banning stablecoin yield could have only a marginal effect on lending—highlighting the uncertainty around how stablecoins will behave at scale and how quickly consumers might substitute deposits for tokenized dollars.

The alleged loophole: Section 404

The bankers took issue with Section 404, describing it as potentially allowing platforms to provide yield-like incentives that replicate deposit interest, but without the same supervision and consumer protection rules applied to banks.

Banking groups said they plan to provide lawmakers with detailed suggestions to strengthen the language.

Lawmakers argue for compromise to keep the bill moving

Senator Tillis said the updated text aims to strike a compromise by prohibiting rewards on idle stablecoin balances while still allowing other forms of customer rewards. Crypto industry stakeholders—including major US exchanges—are reportedly urging a Senate markup to maintain momentum.

Why this matters for crypto markets

Stablecoins are foundational infrastructure for crypto trading, DeFi, and cross-border payments. Any US market-structure framework that limits or redefines yield and rewards could shape:

- How stablecoin issuers compete (and whether they can pass through T-bill returns)

- The design of consumer and exchange “earn” products

- Bank vs. nonbank competition for deposits and payments flows

- The compliance expectations for platforms that custody or distribute stablecoins

The next phase of the debate will likely hinge on legislative wording details: whether “yield” is defined narrowly (explicit interest payments) or broadly (rewards and incentives that mimic interest). For the industry, the outcome could determine how much stablecoin innovation happens inside the banking perimeter versus alongside it.