Stablecoin Rewards and CLARITY Act Tensions Rise Amid Deposit Growth

The CLARITY Act has been met with growing pressure as lawmakers, community banks, and crypto industry leaders clash over stablecoin rewards and bank deposits. Some community banks have expressed concerns that stablecoins are driving deposit flight.

Senator Cynthia Lummis disagrees with these claims, pointing to Bank of America data showing household deposits rising across income groups this year. The FDIC also reports domestic deposits grew for the seventh straight quarter.

Lummis highlights that community banks have seen roughly 5% growth in deposits, better than the rest of the banking sector. She emphasizes Section 404 of the CLARITY Act, which sets strict limitations on stablecoin yield, preventing issuers from providing interest-yielding rewards and marketing coins as bank or FDIC-insured account deposits.

Lummis questions the claim that stablecoins are primarily responsible for community banks' disappearance. Over the last ten years, about 2,000 community banks have vanished, but only 62 new ones have been established.