US banks step up fight over stablecoins

TLDR

US banking groups are intensifying lobbying in Washington to restrict stablecoin yields and tighten who can issue dollar-pegged tokens, as Congress works on the CLARITY Act crypto bill.

1. Major bank lobbies are urging senators to remove a compromise that allows activity-based rewards on stablecoins and instead push for a near-total ban on incentives.
2. Banks frame this as consumer protection but also warn that yield-bearing stablecoins could pull deposits from banks, threatening their lending models, while crypto firms see it as core to innovation.
3. The Senates CLARITY Act markup will be a key test of whether non-bank stablecoin issuers retain room to innovate or face bank-centric rules and tighter limits on rewards.

Deep Dive

1. What Banks Are Doing

Large US banking trade groups, including the American Bankers Association and the Bank Policy Institute, have sent joint letters to the Senate Banking Committee pushing to toughen the stablecoin section of the CLARITY Act. These groups want to scrap a bipartisan compromise that bans passive interest-like yield on idle balances but still allows rewards tied to active usage, such as payments or on-platform activity.

In recent letters, banks argue that even activity-based rewards would evade the intended prohibition and encourage customers to hold and grow stablecoin balances at the expense of deposits, and they are pressing senators to remove these exceptions entirely.major banking trade groups

Crypto industry voices and some lawmakers back the compromise, viewing it as a reasonable middle ground that stops true deposit-like yields while still letting stablecoins compete in payments.stablecoin yield compromise

2. Why Banks Feel Threatened

Banks say they are protecting consumers and financial stability, but their own materials highlight competitive risk: they warn that yield-bearing stablecoins could reduce funds available for loans by 20 percent or more, as money migrates from insured deposits into tokenized dollars plus rewards.major banking trade groups

Regulators outside the US, such as Bank of England Governor Andrew Bailey, similarly worry that lightly regulated stablecoins could undermine banks and spark runs if not easily redeemable, especially when they are used for cross-border payments.Bailey warning

For crypto projects, stablecoin rewards are central to making on-chain dollars attractive for payments, savings, and DeFi; a blanket ban would blunt many business models built around usage incentives.

3. What To Watch Next

The Senate Banking Committees markup of the CLARITY Act is the immediate catalyst. A clean markup that keeps the existing compromise would signal that bank opposition has not derailed the bill and would move the US closer to a federal stablecoin framework.Polymarket odds

If senators side with banks and further restrict or ban rewards, stablecoin products in the US could look much more like plain digital cash with limited yield, favoring incumbents that can monetize in other ways. If the markup stalls or the bill slips off the calendar, the current patchwork of state rules would persist, which benefits established players like USDT and USDC but prolongs regulatory uncertainty.

Conclusion

US banks are not simply criticizing stablecoins in principle; they are fighting specific features like rewards that make tokenized dollars competitive with deposits. The CLARITY Acts stablecoin section will determine whether US rules lean toward protecting bank funding or allowing more experimentation by crypto-native issuers, and the outcome will influence where stablecoin innovation and liquidity concentrate over the next few years.