Banking Groups Push Senate To Tighten Stablecoin Rewards Ahead Of Clarity Act Vote

Eight major U.S. banking groups sent a letter to Senate leadership Monday asking for stricter limits on stablecoin rewards, renewing a long running clash with the crypto industry as the chamber prepares to vote on the Clarity Act.

Banks Say Current Draft Leaves Loopholes

The coalition, including the American Bankers Association and community banking groups, argued the bill’s current language still lets crypto firms pay rewards that function like interest on deposits. They warned this could pull customer funds out of banks and into stablecoins. While federal law already bars stablecoin issuers from paying yield directly, rewards offered through exchanges and other intermediaries remain allowed, prompting banks to seek a firmer boundary.

Circuit Breaker Provision Under Fire

The letter also targeted a proposed “circuit breaker” meant to let regulators step in if stablecoins trigger major deposit losses. Banks called this protection too weak, saying it would only activate after significant damage was already done. One group added that the mechanism would cover an 18-month window and could apply when deposit losses hit smaller community banks holding under $10 billion in assets. Banks also want language removed that ties rewards to how long or how much customers hold in stablecoins.