CLARITY Act: Banking Trade Groups Push For Yield Agreement Revision – Details
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US banking trade groups have called for an amendment to the stablecoin yield compromise in the highly anticipated CLARITY Act. This statement comes ahead of an expected markup on the crypto legislation next week. After months of negotiations, legislators, crypto industry players, and US banks reached an agreement on how to adopt stablecoin yield under the incoming regulatory framework.
In particular, the CLARITY Act will ban all forms of passive, deposit-like interest on stablecoins, effectively preventing competition with traditional bank savings. However, the bill would permit all forms of rewards tied to bona fide activities, including staking, transaction activity, or liquidity provision. Essentially, the aim is to promote a “buy and use” approach towards stablecoins, rather than “buy and hold.”
Banking Unions Move To Close Passive ‘Loopholes’
In an X post on May 8, independent reporter Eleanor Terrett shared a letter by the banking trade groups proposing changes to the stablecoin yield section in the CLARITY Act. The parties to this letter included the American Banking Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, Independent Community Bankers of America, and National Bankers Association
The proposed revisions were primarily aimed at communicating an absolute ban on passive interest and preventing any deposit flights from traditional financial institutions. As seen below, these included grammatical adjustments, particularly within Section 404(c)(1), where the unions proposed replacing the phrase “functional and economic equivalent” with “substantially similar” in defining passive deposit income yield and stablecoin-related yield mechanisms.
There is also a recommendation to completely omit subsection (3)(B), which they claim introduces an ambiguity that undermines the main objective of the compromise. However, it’s unlikely these recommendations will receive much attention, as lawmakers have largely shifted their focus to other aspects of the CLARITY Act. In particular, Terrett reports a Senate aide describing the efforts of trade groups as “pretty milquetoast.”
CLARITY Act Approaches Key Mark-Up Stage
In other developments, the US Senate Committee on Banking, Housing, and Urban Affairs is set to hold a markup session for the CLARITY Act on Thursday, May 14, at 10:30 AM EST, reported by Terrett in a separate post.
During this process, the committee members are expected to review the bill, debate proposed amendments, and vote on whether the legislation should advance to the full Senate for consideration. Following approval by the committee, the CLARITY Act must pass through a full Senate vote and subsequently secure approval in the House of Representatives before reaching the President’s desk to be signed into law.
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