Banking Groups, Attorneys General Oppose Clarity Act Over Stablecoin Concerns

As the Senate prepares to vote on the CLARITY Act on September 15, banking groups and state attorneys general are speaking out against the legislation. The banking associations argue that the existing language in the bill may create loopholes for stablecoins to offer interest payments on their account balances.

The eight banking associations sent a letter to Senate leaders John Thune and Charles Schumer, calling for changes to the CLARITY Act before it moves further through Congress. They emphasized the importance of a 'durable regulatory framework' for the digital asset market and expressed concerns that payment stablecoins with incentives could lead to deposit flight.

The groups pointed out that deposits are the foundation of the banking system, enabling banks to extend credit to families, small businesses, and communities. However, they warned that this could be hindered if stablecoins offer interest payments on their account balances.

New York Attorney General Letitia James also expressed criticism around enforcement clauses in the bill, stating that it may embolden scammers and potentially strip attorneys general of their authority to protect investors and prevent crypto fraud. The coalition of 18 attorneys generals challenged provisions with federal preemption and urged states to maintain their enforcement authority over digital assets.