According to Bitcoin.com News on July 29, 134 bank industry association executives and banking leaders in the United States jointly sent a letter to Senate Majority Leader John Thune and Minority Leader Charles Schumer, urging changes to Section 10404 of the CLARITY Act. While the provision already limits the payment of interest or earnings on payment stablecoins, the banking industry is calling for stronger wording to prevent companies from bypassing the ban through incentive schemes, among other methods.
134 bank executives call for adopting the American Bankers Association’s proposed changes to Section 10404
Based on the contents of the letter, the 134 banking executives explicitly urged: “We urge the Senate to adopt our state bankers association’s suggested amendment to the language in Section 10404 before the final passage.”
Although the current version of Section 10404 already limits paying interest or earnings on stablecoin payments, the banking industry believes the wording contains loopholes and that companies could get around the ban through the following means:
Incentive programs: incentive measures tied to holding stablecoin balances
Holding-period incentives: return arrangements designed based on how long assets are held
Account-duration incentives: quasi-interest arrangements related to the period for opening or maintaining an account
Other similar economic benefits: any design that substantively replicates the features of interest-bearing deposits
The banking industry believes that if the above arrangements are allowed, they would directly compete with insured banks without being subject to the same regulatory framework.
Stablecoin incentive controversy: defining payment tools vs. deposit-like products
According to the original report, the focus of this dispute is whether payment-based stablecoins should be used only as a medium of exchange, rather than as a tool for attracting long-term capital.
Banks argue that incentive measures tied to balances, holding periods, or account durations may replicate the features of interest-bearing deposit products, thereby diverting traditional bank deposits. Once the deposit base of community banks is weakened, funding sources for mortgage lending, corporate expansion, agricultural operations, and community investment would be affected.
The final wording of the CLARITY Act is seen as key in determining how “payment-centered digital assets” operate within the broader U.S. financial system.
Frequently asked questions
Which provision of the CLARITY Act did 134 U.S. bank executives write to the Senate about?
According to a report by Bitcoin.com News, 134 bank industry executives jointly sent a letter urging amendments to Section 10404 of the CLARITY Act. The provision currently limits the payment of interest or earnings on payment stablecoins, but the banking industry wants stronger wording to prevent companies from bypassing the ban through incentive arrangements.
What impact did the banking industry warn could result from stablecoin incentives?
Based on the contents of the joint letter, the banking industry warns that if stablecoin products attract and retain funds through quasi-interest rewards, the funding base that supports local lending could be weakened by “tens of billions of dollars,” affecting the sources of loans provided to families, small businesses, farmers, and local employers.
Who received the letter, and who co-signed it?
According to the report, the joint letter was sent to Senate Majority Leader John Thune (R-South Dakota) and Minority Leader Charles Schumer (D-New York), and it was co-signed by 134 bank industry association executives and banking leaders in the United States.
