US bankers demand Congress ban stablecoin yields

TLDR

US banking lobbyists are pushing Congress to outlaw interest and rewards on stablecoins across all platforms, arguing they threaten bank deposits and community lending.

1. The American Bankers Association (ABA) has made banning stablecoin yields its top 2026 policy priority and rallied thousands of bankers behind a letter to the Senate.
2. Banks warn that yield-bearing stablecoins could drain up to trillions of dollars in deposits, while crypto firms say a ban would cripple U.S. digital dollar competitiveness and DeFi.
3. The fight is stalling key crypto legislation, and the final compromise will decide whether U.S.-regulated stablecoins can offer any kind of yield at all.

Deep Dive

1. What Bankers Are Asking For

The ABA is now explicitly asking Congress to prohibit interest, yield or rewards on payment stablecoins, regardless of whether they are paid by the issuer, an exchange or an affiliate.

According to multiple reports, ABA leadership framed this as an effort to stop payment stablecoins from becoming deposit substitutes, and over 3,200 bankers signed a January letter urging the Senate to extend bans beyond issuers to platforms that route yield through third parties. One detailed summary notes that this sits at the top of ABAs 2026 agenda, ahead of issues like fraud and interest-rate caps.

Existing law (the GENIUS Act) already blocks stablecoin issuers from directly paying interest, but the bankers argue there is a loophole because exchanges and DeFi protocols can still wrap or route stablecoins into yield-bearing products.

2. Why It Matters For Crypto Users

Bank CEOs warn that interest-bearing stablecoins could move up to around $6 trillion of deposits out of banks into on-chain dollars, squeezing community bank lending for mortgages and small businesses. Bank of Americas CEO raised that figure in discussions with lawmakers.

Crypto firms strongly disagree. Circle CEO Jeremy Allaire called these fears totally absurd, arguing at Davos that stablecoin yields improve customer retention rather than triggering systemic bank runs, while SkyBridges Anthony Scaramucci says banning yields would put U.S. digital dollars behind Chinas yield-bearing digital yuan.

If Congress sided with the banks, U.S.-regulated exchanges and fintechs could be barred from offering even modest cash-like rewards on stablecoin balances, which would weaken a core use case of tokens like USDC in savings-style products and DeFi on-ramps.

3. How It Ties Into The Crypto Bill Fight

This yield battle is entangled with the broader CLARITY Act and related market-structure bills in the Senate Banking and Agriculture Committees.

A recent Senate Banking draft added tougher limits on stablecoin rewards. Coinbase called these fatal flaws, withdrew support, and the planned markup was postponed, according to a policy briefing. That has deepened the standoff between banks and crypto companies over the final shape of U.S. rules.

The likely outcomes range from:

1. A near-total U.S. ban on yield for payment stablecoins.
2. A compromise that allows limited, activity-based rewards.
3. Continued deadlock, leaving todays patchwork of issuer bans plus platform-level workarounds.

Conclusion

U.S. banks are openly trying to shut down stablecoin yield before it grows large enough to rival insured deposits, while crypto firms see yield as essential for adoption and global competitiveness. The way Congress resolves this clash inside the CLARITY and related bills will determine whether stablecoins function mainly as digital cash with no return, or as a regulated alternative savings rail with on-chain rewards.