Banking Lobby Urges Senators to Block Stablecoin Reward Rules

Rob Nichols, president of the American Bankers Association, sent a late Sunday letter asking bank executives nationwide to call their senators before the Senate Banking Committee meets on May 14 at 10:30 a.m. ET. He urged opposition to provisions he said would allow interest-like rewards on stablecoins and warned the proposal could push deposits out of traditional banks.

The letter frames the markup as an “urgent advocacy fight that requires your immediate engagement,” and states that, as written, the bill would “unnecessarily incentivize the flight of bank deposits into payment stablecoins, putting both economic growth and financial stability at risk.”

The markup will consider the Digital Asset Market CLARITY Act of 2025, a proposal to create a federal framework for crypto oversight. Under the bill, the Securities and Exchange Commission and the Commodity Futures Trading Commission would split responsibility for deciding which digital tokens are securities and which are commodities. The House passed its version of the bill last July by a 294-134 vote. The Senate draft still must be reconciled with language from the Senate Agriculture Committee before it can reach the full Senate.

A central dispute is whether crypto firms may pay rewards that function like interest for holding stablecoins, which are digital currencies pegged to the U.S. dollar. Senators Angela Alsobrooks and Thom Tillis proposed compromise language on May 2 that would ban “covered parties” from paying any form of interest or yield to U.S. customers solely for holding stablecoins, while still permitting rewards tied to specific activity or transactions. Major exchange Coinbase accepted that compromise; several banking groups did not.

On May 8, a group of financial trade associations sent a letter to Banking Committee Chair Tim Scott and ranking member Elizabeth Warren asking for technical revisions. The associations said the draft law contains exceptions that could be used to evade the intended ban, citing examples such as fixed monthly payments that increase with a customer’s balance. “We are concerned that the proposed language includes exceptions that will enable evasion of the intended prohibition,” the groups wrote.

The White House responded to the banks’ objections. Patrick Witt, the administration’s senior crypto adviser, said he invited Nichols and other bank CEOs to meetings in February to work through issues and that they declined. Witt posted, “They refused. I guess the White House was beneath them?”

A committee markup was planned in January but was canceled after Coinbase raised concerns about how stablecoin rewards would be treated. If the Senate committee advances the bill this week and negotiators reconcile the differing committee texts, the CLARITY Act would become the first federal law to establish a full regulatory regime for digital assets.

Markets have moved while lawmakers negotiate. Crypto investment products reported $857.9 million in inflows last week, the sixth straight week of net inflows and the largest since late April. Bitcoin rose above $80,000 on Monday, its highest level since February, and total crypto assets under management reached about $160 billion. U.S. investors accounted for $776.6 million of last week’s inflows; Bitcoin alone drew $706.1 million. Ethereum, Solana and XRP also posted positive inflows, while bets against Bitcoin saw $14.4 million in outflows.