Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—State bankers press Senate on Clarity Act stablecoin yield ban, (Jul 30, 2026)
A letter to senate leaders warned that holding-based rewards could weaken the local lending funding base by “hundreds of billions” and urged Congress to draw a clearer line between payment innovation and deposit substitution.
A group of over 100 officers of state bankers associations from across the country have urged Senate Majority Leader John Thune and Minority Leader Charles Schumer to revise Section 10404 of the Clarity Act before final passage. In a letter to the senate leaders, the bankers said the provision’s stablecoin interest and yield prohibition should also block interest-like rewards and other holding-based incentives.
While supporting responsible innovation and a well-regulated digital asset marketplace, the bank officers argued that Congress should “draw a clear line between payment innovation and deposit substitution.” For banks in their states, they said, deposits are the foundation for extending credit to families, small businesses, farmers, and local employers. Clear statutory language, the letter added, will help determine whether funds raised locally continue to support credit availability in those same communities.
The bankers recommended clarifying that covered parties may not directly or indirectly pay interest, yield, or substantially similar incentives in connection with the holding of payment stablecoins. They also urged use of a clearer “substantially similar” standard and removal of language that would allow rewards or benefits to be calculated by reference to balance, duration, or tenure. In their view, that language risks undercutting the prohibition the bill is intended to establish.
According to the bankers, payment stablecoins should serve as “transaction tools, not store-of-value products,” and final legislation should guard against incentives tied to holding, retention, duration, tenure, or balance. The letter warned that, if stablecoin products can attract and retain balances through interest-like rewards or other holding-based incentives, the local funding base that supports lending could be weakened by “hundreds of billions.” The bankers contended their proposed changes would reduce the risk that stablecoin products are marketed or structured with deposit-like incentives while lacking the regulatory framework and community-lending obligations that apply to insured depository institutions.
LegislativeActivity: BankingOperations FinTech InterestUsury CommunityDevelopment StateBankingLaws