Banking Groups Push Back on Clarity Act Stablecoin Yield Compromise

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• Banking trade groups are opposing a bipartisan compromise in the Clarity Act designed to settle the dispute over stablecoin yield.
• The proposed language by Senators Thom Tillis and Angela Alsobrooks bans passive yield but allows rewards for “bona fide” activities like staking and liquidity provision.
• Financial institutions argue the exceptions create loopholes that could lead to a $850 billion drop in community bank lending.

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A coalition of major banking trade groups is ramping up pressure on the Senate Banking Committee to tighten restrictions on stablecoin rewards within the pending Clarity Act. Despite a bipartisan compromise introduced late last week by Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD), groups including the American Bankers Association and the Bank Policy Institute claim the current language allows crypto firms to circumvent bans on interest-bearing products.

The dispute centers on a legislative “middle ground” that prohibits stablecoin payments that are “economically or functionally equivalent” to bank interest. However, the draft includes specific safe harbors for rewards earned through staking, market making, and transaction-based incentives. Banks contend these exceptions are too broad and would allow platforms to market stablecoins as de facto savings accounts, siphoning liquidity from traditional deposits.

“Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal—prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal,” the banking groups stated in a collective push for revisions. They cited internal projections suggesting that a shift toward high-yield stablecoins could reduce small-business and farm loans by 20% or more if not strictly regulated.

In contrast, the crypto industry has signaled its strongest support yet for the bill. Coinbase CEO Brian Armstrong urged lawmakers to “mark it up” on social media, reflecting a shift from January when the exchange’s opposition effectively stalled the legislation. Supporters argue that the bill is essential for regulatory certainty and to prevent the crypto industry from moving entirely offshore.

The timing of the pushback is critical. Senate Banking Committee Chair Tim Scott has indicated a markup is targeted for the week of May 11, 2026. With the midterm election cycle rapidly approaching and the Senate scheduled to be out of session for half of the coming months, proponents warn that any further delays caused by the banking lobby could kill the bill’s momentum for the remainder of the year.

If the committee proceeds, the bill would still face a full Senate floor vote and reconciliation with previous House versions. However, the current standoff over a few lines of text regarding third-party rewards remains the final major hurdle for the most significant piece of crypto legislation in years.

Disclaimer: This article is for informational purposes only and does not constitute advice of any kind. Readers should conduct their own research before making any decisions.

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