Banks Call for Stablecoin Rewards Ban Amid Deposit Outflow Fears

Dozens of major U.S. banks have urged Senate leaders to strengthen the provisions on stablecoins in the CLARITY Act, a bill aimed at regulating the crypto market structure.

The bankers propose banning any rewards that could substitute for interest on deposits, warning that such mechanisms could trigger deposit outflows from banks totaling hundreds of billions of dollars.

The appeal was signed by representatives of several major financial institutions, including Bank of America and U.S. Bank, and notes that banks support the development of the digital asset market but stress the need to clearly distinguish between payment stablecoins and bank deposits.

The signatories backed changes to Section 10404 of the CLARITY Act proposed by state banking associations, which would ban direct or indirect payments of interest or investment income for holding payment stablecoins, extend this ban to rewards and bonuses equivalent in economic substance to interest payments, and prohibit accruing rewards based on balance size or time held.