A proposal to regulate stablecoins in the United States has hit a roadblock in the Senate as banking industry groups push back against White House findings on the potential risks of allowing yield features in stablecoins. The dispute has slowed progress on the Digital Asset Market Clarity Act, leaving lawmakers and industry stakeholders at odds over how rewards on stablecoin holdings could affect the traditional financial sector.
Bank groups challenge stablecoin yield findings
The American Bankers Association, the main trade group representing banks in the U.S., disagreed with a recent report from the Council of Economic Advisers. The ABA argued that the report failed to consider the scenario in which stablecoins, a type of cryptocurrency that tracks traditional currencies such as the U.S. dollar, continue to offer users rewards or returns similar to deposit interest.
According to the ABA, these yield-like features could become a powerful driver for shifting funds away from traditional bank accounts. The association has maintained that, if stablecoins can offer attractive returns, depositors may be incentivized to move their money out of banks in search of higher rewards.
In their analysis, ABA economists estimated that the stablecoin market could surge from the current $300 billion level to as much as $2 trillion if reward mechanisms remain available. Such a growth, they believe, could have significant implications for bank liquidity and lending.
The bankers’ group also highlighted that restricting yield on payment stablecoins would protect insured deposits and position stablecoins as payment tools rather than a replacement for savings accounts. They want Congress to carefully study long-term effects before finalizing any legislation.
Senate negotiations and unresolved tensions
Work on the Digital Asset Market Clarity Act, a bill aiming to create a regulatory framework for U.S. digital assets, has stalled in the Senate Banking Committee over the stablecoin yield debate. Some lawmakers have taken the bankers’ warnings seriously and have discussed limiting certain reward structures in the draft bill.
The latest compromise under consideration would prohibit yield features that directly resemble interest from deposit accounts, while still allowing some program-based rewards like those tied to spending, similar to credit card points.
Despite these efforts, the banking industry has yet to endorse the committee’s proposal. Representatives from major banking groups continue to circulate memos and policy recommendations to lawmakers, seeking stronger guarantees to protect traditional banks from potential deposit outflows.
Senator Cynthia Lummis, who is active in cryptocurrency policy and partners on bipartisan digital asset bills, emphasized the urgency for legislative action. On the social media platform X, Lummis urged colleagues to move the bill forward and warned that the opportunity for reform could slip away.
Senator Cynthia Lummis expressed that “America needs Clarity” on crypto regulation and called for immediate action, indicating that the current moment is crucial for passing digital asset legislation.
So far, the Senate Banking Committee has not scheduled a hearing or vote on the Digital Asset Market Clarity Act. Supporters had anticipated progress before the end of the month, but no date has been set as of this week.
The ongoing debate highlights not only the gap between regulators and banks on stablecoin policies, but also the potentially far-reaching effect such measures could have on the U.S. banking system if stablecoin rewards are widely adopted.
