Banking lobby attempts to kill Clarity Act’s stablecoin progress as markup is scheduled for next week

A notable development has hit the crypto markets. US banks are mounting an aggressive lobbying effort to stall the CLARITY Act, even as key US lawmakers signal a fast-tracked timeline to put the bill on the president’s desk before July 4. The legislative clash centers on the Digital Asset Market Clarity Act, a sweeping regulatory framework that cleared the House with bipartisan support in July 2025. For months, the bill has been bogged down in the Senate over a highly contentious provision regarding stablecoins and whether digital asset firms can offer yield to customers.

While a recent bipartisan compromise aimed to clear this roadblock, the banking sector is now publicly rejecting the drafted language, arguing it threatens the foundation of local lending and risks widespread capital flight. Despite the friction, proponents of the bill on Capitol Hill are projecting confidence. Bolstered by the anticipated support from the Trump administration, Senate negotiators are holding firm against the banking lobby, setting the stage for a critical committee markup the week of May 11.

Market Dynamics

The stablecoin yield loophole and fears of deposit flight The core of the dispute lies in how the CLARITY Act regulates yield-bearing payment stablecoins. A coalition of major trade groups, including the American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America, issued a joint front this week criticizing the language drafted by Senators Thom Tillis and Angela Alsobrooks. While the banking groups acknowledged the senators’ overarching policy goal to prohibit the direct payment of yield and interest on stablecoins, they claim the current text of Section 404 is riddled with loopholes.

The coalition argues that the legislation still permits digital asset exchanges and intermediaries to distribute rewards tied to membership programs, provided they are not calculated or distributed in the same way as traditional bank interest. For the legacy financial sector, this is a distinction without a difference. The trade groups argue that allowing crypto firms to calculate permissible rewards based on customer duration, account balances, and tenure overtly incentivizes the idle holding of stablecoins.

Traditional institutions rely on those idle funds remaining in deposit accounts to finance community growth. According to the coalition's internal research, the proliferation of yield-earning stablecoin alternatives could siphon off enough liquidity to reduce available capital for consumer, small-business, and agricultural loans by as much as 20%. Meanwhile, market intelligence indicates a growing divide within the broader financial sector regarding this pushback.

Market Impact

While retail-facing megabanks and community lenders remain vehemently opposed to the compromise, institutions without massive consumer deposit arms are showing signs of cautious comfort with the Tillis-Alsobrooks framework. Senate negotiators refuse to back down Faced with the prospect of their compromise unraveling, lawmakers are pushing back against the banking lobby’s demands. Senator Tillis, who spearheaded the stablecoin provision, defended the drafted language as a hard-fought, balanced product that successfully neutralizes the specific threat of deposit flight without suffocating industry innovation.

Tillis noted that the banking industry was not blindsided by the text, stating that traditional financial stakeholders have had a seat at the negotiating table for months to offer direct feedback. The current text, he argued, explicitly prohibits stablecoin rewards from functionally mimicking bank deposit interest. While it allows digital asset companies to utilize other operational reward structures, Tillis warned against letting the pursuit of a flawless bill derail the broader regulatory certainty the industry desperately requires.

The senator’s remarks highlighted a growing frustration on Capitol Hill with the banking sector’s shifting goalposts. He suggested that certain factions within traditional finance may simply oppose the passage of the CLARITY Act altogether, viewing the stablecoin yield debate not as a policy flaw, but as a convenient mechanism to stall the legislation indefinitely. Crypto industry analysts echo this sentiment.

Crypto markets are watching this development closely as investors weigh its potential impact on prices.