Senate Crypto Bill Under Fire: How Banking Lobbyists Are Fighting the CLARITY Act

How Banking Lobbyists Are Fighting the Senate Crypto Bill

The conflict over stablecoin rewards is no longer a technical squabble. The ICBA is calling it “a deposit flight,” in which community banks would lose billions in deposits to yield-bearing stablecoins.

In July, the ABA, ICBA, and dozens of state associations argued that the Senate crypto bill did not do enough to prevent stablecoins from encroaching on the traditional banking sector’s deposits. In early August, another group of state associations wrote to the Congress demanding changes to CLARITY before its floor vote.

Their position is based on two assumptions:

1. The deposits paid into stablecoins would have gone to the traditional banking system.
2. The ability to make loans is what fundamentally differentiates banks from crypto platforms.

According to the ICBA’s estimates, a wide-scale adoption of yield-bearing stablecoins would drain $1.3 trillion from community-bank deposits and reduce lending by around $850 billion.

These figures are, of course, estimates used to score political points. Nevertheless, the figures demonstrate how seriously the banking sector views this issue. By pointing to the losses suffered by community banks, lawmakers can tie the Senate crypto bill to a campaign to save the rural economy and communities.

Banks typically rely on the deposits to fund their lending activities. The introduction of yield-bearing stablecoins adds another layer of competition for deposits.

Crypto companies, on the other hand, argue that CLARITY already prohibits passive rewards that are economically equivalent to interest-bearing deposits. Coinbase CEO Brian Armstrong pointed out that most of the lobbying efforts have already been satisfied by the bipartisan compromise. Therefore, the dispute over rewards has been concluded and should not derail negotiations over the Senate crypto bill.

Why the Senate Crypto Bill Is Suddenly in Trouble

The banking sector is not the only reason why the Senate crypto bill has been under threat. Lawmakers have yet to iron out a few key details, including ethics rules for government officials, President Trump’s crypto-related businesses, anti-money laundering regulations, and rules concerning decentralized finance.

That being said, the battle with the banking lobby complicates the situation. The Senate crypto bill requires a 60-vote majority to clear the upper chamber.

Republicans are unlikely to achieve that number on their own. Several influential senators have expressed concerns about CLARITY’s impact on community banks. The full Senate, however, failed to vote on the measure when it reconvened in August. Senate Majority Leader John Thune has scheduled a procedural vote for September 15.

This timeline is concerning. It is unclear whether CLARITY will be able to get through the full Senate before the November elections. The closer the vote to the election day, the less likely it becomes that a bipartisan coalition will be mustered.

Could the Banking Lobby Actually Kill the CLARITY Act?

The Senate crypto bill can, theoretically, still fail, but not solely because of the banking lobby. Both the crypto industry and the Trump administration assign high priority to this legislation. It has broad bipartisan support in the Senate Banking Committee.

That being said, the banking lobby is in a strategically strong position The required majority is 60 votes, which means that a fairly small number of senators could derail the Senate crypto bill.

The banking sector is openly advocating for a ban of stablecoin rewards, but community banks are private entities. In theory, their ability to compete for deposits is limited only by their capacity to innovate and attract more customers. Crypto companies, on the other hand, cannot control whether or not the federal lawmakers will pass a bill that could significantly weaken their business.

What Happens Next for the Senate Crypto Bill?

September 15 is fast approaching, and so is the next procedural vote on the Senate crypto bill. If lawmakers manage to find a compromise on the stablecoin rewards, ethics rules, and a few other issues still outstanding, the Senate crypto bill has a decent chance of clearing the Senate. If the vote fails, it will be much more difficult to get the bill to the White House before the November elections.

Even if the Senate manages to approve the Senate version of the bill, it will have to reconcile its version with the House’s bill in the fall. Both chambers must agree on the language before the legislation can be sent to the President for his approval.

The banking lobby has already managed to convince senators to change the language several times. Crypto companies have demonstrated their willingness to withdraw support when the lobbying efforts have gone too far. The entire dispute over the Senate crypto bill’s stablecoin rewards is really about the ability of traditional banks to compete with crypto exchanges.

FAQ

What is the Senate crypto bill?

The Senate crypto bill refers to the upper chamber’s iteration of the law, which seeks to establish a federal regulatory framework for digital assets, crypto exchanges, token issuers, stablecoins, and other market participants.

Why are banks opposing the CLARITY Act?

Banking groups have lobbied extensively to remove provisions that would have enabled crypto exchanges to make rewards on stablecoin balances. They argue that the ability to make rewards will lead to a flight of deposits from the traditional banking system.

Does the CLARITY Act prohibit stablecoin yield?

No, the current language only restricts rewards that provide yield similar to those of a bank deposit. The Senate version of the crypto bill allows for rewards that are “related to a customer’s transaction, payment activity, or other activity.”

When will the Senate vote on the CLARITY Act?

The next procedural vote on the Senate crypto bill is scheduled for September 15, following the August recess.

Can the Senate crypto bill pass in 2026?

The Senate crypto bill can still pass, but the prospects are growing steadily more challenging by the day. The measure requires a 60-vote majority to clear the Senate, and there are several contentious issues that must first be resolved before the vote can take place.