Community Banks Reportedly Push Back On CLARITY Act – Warn Stablecoin ‘Yield Loopholes’ Persist

• Banks remain divided over the new CLARITY Act yield compromise, with some community banks noting that the revised text still leaves loopholes for crypto firms.
• Critics argue that the clause is phrased too broadly and does not ban crypto-linked yield products; rather, it modifies how they may be structured and promoted.
• The Consumer Bankers Association warned that rewards based on wallet tenure, balances, or holding periods essentially reproduce yield products and may drive deposit flight from banks.

The banking industry reportedly remains divided over the latest yield-related compromise, with the Digital Asset Market Clarity Act (CLARITY Act) still on hold. The issue raising concerns is whether stablecoin issuers can still offer yield in disguise. 

Several large consumer-facing banks told journalist Eleanor Terrett that the new language introduced last week still leaves wiggle room for crypto companies to circumvent the restriction. 

The Yield Fight Is Not Over Yet

However, one bank involved in the talks reportedly said the provision is too narrowly drafted and will not completely ban crypto-linked yield offerings; rather, it will just change how they can be structured and marketed.

While banks without major retail operations appear more comfortable with the final language, said Terrett, some community bank trade associations in Washington, such as the Independent Community Bankers of America (ICBA), continue to voice reservations.

Dealing With Industry Friction

This is a step back from last week, when Sens. Thom Tillis (R-N.C.) and Angela Alsobrooks (D-Md.) reached a bipartisan agreement to advance the Digital Asset Market Clarity Act, releasing compromise language that limited the structure of stablecoin rewards while maintaining specific incentive models.

Before Tillis and Alsobrooks reached a deal that resolved a significant area of contention ahead of a possible Senate Banking Committee markup during the week of May 11, negotiations between cryptocurrency companies and banking lobbyists had dragged on for months. 

Circle’s (CRCL) price hit a one-month high this week, on hopes that the CLARITY Act finally was ready to hit the Senate Banking Committee's floor this week. On Stocktwits, retail sentiment for CIrcle’s USDC remained in the ‘bearish’ territory, while chatter stayed at low levels over the past day. 

Community Banks Say ‘Ban’ Still Has Loopholes

The Consumer Bankers Association, while thanking Sens. Thom Tillis and Angela Alsobrooks for trying to address concerns, said the current compromise wording still “falls short” of banning interest-like incentives outright. 

The group warned that permitting rewards tied to how long users hold stablecoins, the size of their balances, or wallet tenure effectively recreates yield products under a different structure and undermines the intent of the restriction.

Allowing such incentives might speed deposits from traditional banks into stablecoin platforms, jeopardizing consumer, small-business, and agricultural lending, according to the CBA. The group expects to press lawmakers for tougher wording before negotiations and committee markups.

Read also: HYPE Outperforms Bitcoin As Hyperliquid Chairman Pushes Case For Layer-1 Finance

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