U.S. banks are urging the Senate to strengthen stablecoin regulations in the pending Clarity Act, which aims to structure the virtual asset market. They argue that if stablecoin issuers offer interest-like rewards, it could trigger a mass exodus of bank deposits, potentially undermining local economic lending foundations.
On Wednesday, reports indicated that 134 members, including the American Bankers Association and banking executives, recently submitted a statement to the U.S. Senate. They advocated for amending the Clarity Act to tighten restrictions on interest and yield payments for stablecoins.
The banking sector proposes expanding the scope of restrictions on stablecoin interest payments. This would prevent companies from offering economic benefits similar to interest through rewards, incentives, or other means.
In essence, they argue for prohibiting practices that provide interest-like economic benefits to attract deposits.
Banks worry that if stablecoins entice users with high rewards, it could lead to a significant outflow of deposits. They stress that a decline in deposits could weaken lending resources for households, small businesses, farmers, and local enterprises, negatively impacting regional economies.
Furthermore, the banking sector contends that payment stablecoins should function as payment instruments rather than investment products.
The Clarity Act, designed to regulate the entire U.S. virtual asset market, is currently awaiting Senate deliberation. In contrast to the banking sector’s position, the cryptocurrency industry argues that stablecoin interest payments are a crucial component of the decentralized finance (DeFi) ecosystem.