Catenaa, Monday, May 04, 2026- Major US banking groups on Monday said a proposed Senate compromise on stablecoin regulation fails to fully block interest-like rewards, warning it could shift deposits away from banks and weaken lending across the economy.
The American Bankers Association, Bank Policy Institute and other trade groups responded to revised language in the Clarity Act crafted by Sens. Angela Alsobrooks and Thom Tillis.
The proposal bans direct interest payments on stablecoins but allows certain transaction-based rewards. Banking groups argue the distinction leaves room for workarounds that mimic deposit interest.
They said exchanges or wallet providers could structure incentives tied to balances or holding periods, effectively recreating yield under different terms.
Deposit Flight Concerns Rise
Banks warn that such mechanisms could draw funds out of traditional accounts into digital tokens. Deposits serve as a primary funding source for loans to households, farms and small businesses.
Industry research cited by the groups suggests yield-bearing stablecoins could cut lending capacity by as much as one-fifth.
That shift would reduce credit availability, particularly in sectors dependent on local banks for financing.
Crypto Industry Pushback Builds
Crypto firms and some lawmakers support allowing rewards, arguing restrictions could limit product growth and reduce competitiveness. They view incentives as part of broader innovation in digital finance.
The compromise follows months of negotiations involving regulators, lawmakers and industry participants. It is tied to wider efforts to pass federal crypto market structure legislation.
Expert Views Highlight Risks
Policy analysts say the debate centers on how stablecoins function within the financial system. If treated like payment tools, their impact on deposits may remain limited.
If they evolve into savings alternatives through rewards, they could compete directly with bank accounts. That would alter how credit is created and distributed across the economy.
Some economists point to past shifts in deposit flows, noting that even moderate changes can affect lending patterns over time.
Legislative Path Remains Unclear
Lawmakers are still working to finalize language that balances innovation with financial stability. The Senate faces additional hurdles, including political disagreements and limited time for debate.
Banking groups said they will continue engaging with Congress to tighten provisions and close gaps that could enable indirect yield payments.
The outcome will shape how stablecoins are integrated into the US financial system and how regulators divide oversight between agencies.
Stablecoins are digital tokens designed to maintain a fixed value, usually pegged to the US dollar. Their use has expanded rapidly in payments, trading and decentralized finance. Lawmakers have sought to regulate the sector to address risks tied to consumer protection and financial stability.
The GENIUS Act set early guardrails by prohibiting issuers from paying interest, aiming to keep stablecoins distinct from bank deposits. Debate has since shifted to whether intermediaries such as exchanges and wallets can offer rewards that resemble interest.
Analysts warn that if stablecoins attract large volumes of deposits, traditional banks could lose a major funding source for loans.
Similar concerns have appeared in past financial shifts, including the rise of money market funds, which altered deposit flows over time. Policymakers now face pressure to define stablecoin rules clearly as adoption grows.
