US banking groups urge stricter rules on stablecoin interest

The American Bankers Association (ABA), the Independent Community Bankers of America (ICBA), and 76 state banking associations are calling for a stricter ban on interest payments for stablecoins under the proposed Clarity Act. In a letter sent on July 13 to Senate Republican Leader John Thune and Democratic Leader Chuck Schumer, the groups highlighted the need for clearer regulations on payment stablecoins, The Block reported. They argued that the ambiguous language in Section 404 of the bill could allow stablecoins to substitute for bank deposits, potentially triggering outflows from community banks that fund mortgages, small business financing, and agricultural credit. The associations urged lawmakers to impose "clear and effective limits" on any rewards that would encourage the long-term holding of stablecoins.