Why Are US Banks Trying to Block Stablecoin Yield Payments?

▲ Stablecoin ©Da-sol Ko

Pressure from the US banking sector to strengthen regulations on stablecoin yield payments is intensifying, revolving around the CLARITY Act, a US cryptocurrency market structure bill. The banking industry argued that “deposit outflow must be prevented” and that the bill's allowance for 'passive interest' should be more strongly blocked.

According to cryptocurrency media outlet Bitcoinist on May 10 (local time), major US banking associations submitted amendments to the CLARITY Act's provisions regarding stablecoin yields to Congress. The letter included the participation of the American Bankers Association (ABA), the Bank Policy Institute (BPI), the Consumer Bankers Association (CBA), the Financial Services Forum (FSF), the Independent Community Bankers of America (ICBA), and the National Bankers Association (NBA).

Currently, the CLARITY Act is designed to completely prohibit passive deposit-like interest payments for stablecoins, while allowing rewards based on actual activities such as staking, trading activities, and liquidity provision. In effect, it encourages a structure centered on 'buy and use' rather than 'buy and hold'.

However, the banking sector pointed out that some wording still leaves loopholes in interpretation. In particular, they argued that the phrase 'functional and economic equivalent' in Section 404(c)(1) of the bill should be replaced with 'substantially similar'. The intention is to more strongly block stablecoins from competing with traditional bank deposits. Banking groups also demanded the deletion of certain sub-provisions, claiming that some detailed provisions could weaken the bill's core purpose.

However, the atmosphere within Congress is reportedly relatively calm. According to independent journalist Eleanor Terrett, some Senate aides described the banking sector's demands as "pretty milquetoast." It was explained that Congress's current focus is more on the overall structure of the CLARITY Act and the market regulatory framework than on stablecoin issues.

Meanwhile, the US Senate Committee on Banking, Housing, and Urban Affairs is scheduled to hold a mark-up session for the CLARITY Act on May 14 at 10:30 AM (ET). During this process, the committee will review and debate amendments before deciding whether to send the bill to a full Senate vote. After passing both the House and Senate and receiving the President's signature, it will be finally enacted into law.

*Disclaimer: This article is for investment reference only and is not responsible for investment losses based on it. The content should be interpreted for informational purposes only.*