Stablecoins: Banks Refuse Any Compromise on Yields

Stablecoins are at the center of a new standoff between community banks and the crypto sector. Today, in the United States, the review of the CLARITY Act reignites opposition surrounding the yields associated with these digital assets. The Independent Community Bankers of America is calling for a complete ban on rewards linked to these assets. Its leader, Rebeca Romero Rainey, rejects the idea of a compromise on this issue. Meanwhile, banks are warning of a possible massive transfer of deposits to digital assets in this debate.

In Brief

• American community banks are demanding a total ban on rewards related to stablecoins.
• The ICBA estimates that up to $1.3 trillion in deposits could leave the banking system.
• According to the association, this outflow could lead to a decrease of $850 billion in local loans.
• The disagreement over yields is now complicating the progress of the CLARITY Act in the Senate.

Stablecoins Revive the Debate Around the CLARITY Act

The CLARITY Act is facing a new difficulty after a compromise among crypto stakeholders. Discussions had allowed for limiting the remuneration linked to stablecoins to certain activities. However, community banks contest this approach. They demand that rewards be fully regulated before any progress can be made. This disagreement is still blocking the text. Banks want to clarify this issue.

The Independent Community Bankers of America represents about 5,000 American community banks. The association believes that the text could affect their operations and local credit. This request thus broadens the conflict.

Rebeca Romero Rainey, leader of the ICBA, defends a firm position. In an interview with Banking Dive, she believes that the loophole around rewards must completely disappear.

According to her, a compromise does not address the main concern. This position thus hardens the debate around stablecoins and complicates the search for an agreement. The financial risk structures their argument.

Banks Fear a Deposit Outflow

For the ICBA, the main risk concerns deposits held in the banking system. Rebeca Romero Rainey estimates that $1.3 trillion could move to stablecoins if the legislative framework evolves. According to her estimate, this movement could cause a decrease of $850 billion in local loans. This fear now weighs in the discussions.

The ICBA leader also emphasizes the lack of guarantee regarding a return of these funds to local communities. She believes that cryptocurrencies would not automatically replace the deposits lost by banks. The association thus calls for consideration of this risk. The concerned senators reinforce this opposition.

This concern has already found a political echo. Community banks have reportedly convinced Josh Hawley and Jerry Moran to oppose the CLARITY Act in its current form. The issue of yields thus transcends the banking sector alone. The debate remains particularly sensitive.

A Vote Under Pressure and Opposing Positions

Rebeca Romero Rainey also criticizes a report from the White House Council of Economic Advisers. Titled “Effects of the Ban on Stablecoin Yields on Bank Loans,” she believes this document downplays the fears related to a deposit outflow. She argues that some analyses do not sufficiently account for the possible changes after the law’s adoption. She maintains that the consequences could differ. This divergence further weakens the parliamentary timetable.

The Senate will meet on September 15 to vote on the CLARITY Act. However, it seems unlikely that at least 60 senators will agree to advance the text. Without this support, the project could be abandoned. Each camp is defending its interests here.

The next steps will thus depend on the ability of the various stakeholders to resolve this disagreement. Community banks are demanding a total ban on rewards related to stablecoins. A compromise had emerged around limiting remuneration to certain activities. The debate thus revolves around digital innovation, deposits, and local financing.

The upcoming steps will show whether this opposition can evolve before the examination of the text. The protection of deposits remains at the heart of the banking issue. For the crypto sector, the wording adopted will determine the conditions applicable to stablecoins.