U.S. banks urge tighter stablecoin reward limits in CLARITY Act

U.S. banking groups sent a joint letter to Senate leadership on Sept. 10 urging tighter rules on stablecoin interest, yield and rewards under Section 10404 of the CLARITY Act. According to a letter released by the American Bankers Association, the groups said the current language leaves room for indirect compensation tied to holding stablecoins and proposed extending the ban beyond methods “economically or functionally equivalent” to bank deposit interest to also cover those that are “substantially similar.” The groups also called for deleting a provision that would allow rewards based on stablecoin balances or holding periods. The banking industry argued such incentives could turn stablecoins into a deposit substitute rather than a means of payment, potentially draining deposits from community financial institutions and constraining lending to small businesses, agriculture and housing.