Banking groups urge Senate to amend stablecoin yield rules

Major U.S. banking associations have urged Senate leaders to strengthen proposed restrictions on stablecoin rewards, warning that ambiguous language in pending legislation could threaten the deposit base of community banks and local lending nationwide. In a joint letter sent on July 13 to Senate Majority Leader John Thune and Minority Leader Chuck Schumer, the American Bankers Association, the Independent Community Bankers of America, and 76 state associations requested targeted revisions to the Digital Asset Market Clarity Act.

The groups focused their concerns on Section 404 of the bill, which prohibits paying direct or indirect interest or yield on payment stablecoins but permits "activity-based" or "transaction-based" rewards. The banking associations argue this exception creates a significant loophole, allowing firms to engineer incentives tied to holding balances or tenure that effectively mimic bank deposit interest. They contend this could encourage consumers to treat stablecoins as savings vehicles rather than payment tools, contrary to the stated intent of Congress.

In the letter, the associations expressed concern that such incentives could pull customer funds away...