Category: Security & Regulation || Posted Jul 25, 2026

Banking Associations Push Back on Updated U.S. Clarity Act Over Stablecoin Yield and BSA Exemptions

Bank vs. Byte: Why Banking Associations Are Fighting the Updated U.S. CLARITY Act

The push to establish a single federal framework for digital assets has hit a major wall in Washington. Following the release of an updated draft of the Digital Asset Market CLARITY Act (H.R. 3633), America’s most influential banking trade groups—including the American Bankers Association (ABA), Bank Policy Institute (BPI), Consumer Bankers Association (CBA), and Independent Community Bankers of America (ICBA)—issued a joint pushback.

While the bill was originally envisioned as a landmark compromise to divide authority between the SEC and CFTC, traditional financial institutions argue the latest Senate text leaves dangerous loopholes open. The confrontation centers on two core issues: indirect stablecoin yields and Bank Secrecy Act (BSA) compliance gaps.

1. The Yield Loophole and "Deposit Flight"

At the heart of the friction is Section 404, the provision regulating stablecoin interest. On paper, Section 404 explicitly bans crypto platforms from paying passive, savings-account-style yield simply for holding a stablecoin balance.

However, the updated Senate draft permits "activity-based" rewards, loyalty incentives, and promotions calculated on balance or tenure. Banking groups argue this creates a huge loophole:

1. The Workaround: Crypto firms can easily structure indirect membership or trading programs that pay out yield under the guise of "loyalty rewards".
2. The "Deposit Flight" Threat: If non-bank stablecoin issuers can offer interest-like returns without paying for FDIC insurance or adhering to fractional reserve standards, capital will naturally migrate away from commercial bank accounts.
3. Main Street Impact: Community banks rely heavily on consumer deposits to fund local lending—including mortgages, small business loans, and agricultural credit. Siphoning those deposits into stablecoin ecosystems directly starves local economies of capital.

2. BSA Exemptions and Anti-Money Laundering Gaps

The second major objection focuses on financial security and regulatory parity. Lenders argue that if stablecoin issuers and digital asset providers operate like financial institutions, they must follow the exact same security rules.

The Bank Policy Institute highlighted several key enforcement gaps in the current text:

1. Intermediary Parity: Banking trades demand that all Digital Asset Service Providers (DASPs) and crypto intermediaries face strict Bank Secrecy Act (BSA) obligations, including Know Your Customer (KYC) and suspicious activity reporting.
2. Sanctioning Mixers: Bankers are pushing for explicit statutory authorization allowing the U.S. Treasury to target and sanction crypto mixers and tumblers routinely used by illicit actors.
3. DeFi Exploits: Lenders warn that the existing language allows companies to evade compliance simply by claiming to be "decentralized" or incorporating offshore.

"Current language in the bill would still allow for ways to pay interest and yield for holding stablecoins... which will siphon bank deposits and threaten local lending across the country."

— Joint Statement by Major U.S. Banking Associations

Where the Legislation Stands Today

With Senate Majority Leader John Thune confirming a tight legislative calendar ahead of the August recess, a full Senate vote on the CLARITY Act before lawmakers leave Washington is unlikely.

This delay isn't just a calendar issue; it reflects a deep policy stalemate. Banking groups are actively lobbying key senators for targeted amendments to lock down Section 404 and enforce strict BSA compliance before the bill can move forward.

September is shaping up to be the real showdown for the CLARITY Act. Until Congress can reconcile the gap between crypto platform flexibility and traditional bank safety rules, the future of U.S. digital asset regulation remains on hold.