Banking Associations, State Attorneys General Challenge CLARITY Act Ahead of Vote

Eight banking associations and seventeen state attorneys general have expressed concerns about parts of the CLARITY Act before its September 15 procedural vote. The groups are worried that stablecoin rewards could drain deposits from banks, reducing lending to households, farmers, small businesses, and local communities.

The banking groups argued that Section 10404, which covers payments and incentives linked to payment stablecoins, might allow crypto companies to offer stablecoin rewards similar to deposit interest. They requested changes to the bill, including removing the word 'solely' in subsection (c)(1)(A), revising references to 'a payment stablecoin balance,' and targeting reward programs that resemble deposit interest.

Additionally, they asked for a 'substantially similar' standard for stablecoin incentives, which would allow regulators to examine whether a reward acts like bank interest instead of relying on the name or structure chosen by its provider. The banking organizations also requested changes to Section 10404(3)(B), which they said could permit companies to calculate rewards according to a stablecoin balance, the length of time an asset is held, or a customer's tenure with a platform.

Meanwhile, state attorneys general led by New York Attorney General Letitia James have warned that federal preemption provisions in the bill could restrict state powers to pursue crypto fraud. They argued that granting the SEC power to preempt state registration authorities could create uncertainty over cases brought against crypto businesses and make it harder for states to protect investors.

The attorneys general tied their warning to the amount of money Americans have lost through crypto-related schemes, citing $11.4 billion in cryptocurrency losses reported by the FBI during 2025. They urged Congress to retain state registration systems and the existing federal-state enforcement partnership.