CLARITY Act: Banks Push To Close Stablecoin ‘Loophole’ Ahead of May 14 Markup

The banking industry has renewed its push for a broader ban on stablecoin rewards in the CLARITY Act ahead of the crypto bill’s markup this week. American Bankers Association (ABA) CEO Rob Nichols sent a letter to bank CEOs calling for their immediate engagement on the stablecoin loophole.

ABA CEO Calls For Immediate Engagement on Stablecoin Text In CLARITY Act

In a letter to the member banks’ CEO, the ABA CEO urged them to contact their senators and ask them to close the stablecoin loophole before the crypto bill moves forward. He also asked these CEOs to encourage their employees to do the same.

“We believe that committee members may not be fully aware of the risks to the economy posed by the stablecoin loophole. Your immediate engagement can make a difference,” Nichols said. This comes despite Senators Thom Tillis and Angela Alsobrooks implying that the stablecoin yield compromise in the CLARITY Act is final.

Under the compromise, crypto firms won’t be able to pay stablecoin rewards on idle balances and can only pay activity-based rewards. The ABA CEO remarked that the current version of the bill, although improved from the earlier version, still does not “adequately” prevent crypto companies from offering interest-like rewards on payment stablecoins.

Nichols warned that, without additional changes, the current stablecoin language in the CLARITY Act would “unnecessarily incentivize the flight of bank deposits into payment stablecoins, putting both economic growth and financial stability at risk.”

As part of the renewed push to close this stablecoin loophole, banking trade associations had also sent a letter to Senate Banking Committee members detailing their concerns and outlining ways to “strengthen” the section and protect bank deposits.

All Eyes On Crypto Bill’s Markup

The focus is on the CLARITY Act’s markup, which will be held on May 14, with a huge likelihood that Senate Republicans would have to advance the bill along party lines. Senate Banking Committee Chair Tim Scott signaled last month that he won’t mark up the bill until he has all Republicans’ support. As such, the move to mark up the bill now indicates that all Republicans on the committee are likely to vote in its favor.

However, this is unlikely to be the case for Democrats on the committee. Galaxy Research highlighted Senators Elizabeth Warren, Tina Smith, Jack Reed, and Chris Van Hollen as Democratic committee members who are likely to oppose the bill.

Meanwhile, Galaxy Research noted that if Democrats vote for the bill in markup, the likelihood of ultimate passage on the Senate floor increases significantly. According to Polymarket data, there is currently a 64% chance that U.S. President Donald Trump will sign the CLARITY Act into law this year.