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FollowingEight major U.S. banking institutions warn: The final draft of the CLARITY Act fails to effectively regulate stablecoins
The eight major U.S. banking institutions have issued a warning that the final draft of the CLARITY Act (Clarification Act), which is awaiting review by the Senate, fails to fully regulate stablecoins. The banking groups believe that the "circuit breaker" mechanism in the bill, which is designed to be triggered when deposit outflows reach a certain level, is not a real security measure.
Fox Business reporter Eleanor Terrett reports that eight organizations, including the Banking Policy Institute, the American Bankers Association, the Financial Services Forum, and the American Independent Community Bankers Association, sent letters to Senators John Thuan and Chuck Schumer today expressing their concerns.
These organizations pointed out that if incentives such as interest or income are provided to payment type stablecoins, it may lead to a large loss of bank deposits, thus weakening their ability to lend. According to banking groups, community banks and deposit-based lending institutions could be particularly hard hit.
The letter also severely criticized the current "circuit breaker" mechanism designed to prevent the outflow of deposits in the text of the CLARITY Act. Groups point out that the mechanism will only activate "after a large outflow of deposits," which means it cannot be seen as a precautionary security measure.
Banks also said stablecoin providers or related companies may circumvent the ban by adopting different reward and incentive models rather than directly paying interest. As a result, they called for broadening the scope of the language in the bill and closing loopholes that would allow interest-like payments to be made on stablecoin balances.
Recommendations made by these groups include: explicitly banning all direct or indirect interests and returns associated with holding stablecoins; removing certain restrictive phrases from the current text; and banning incentives that are economically similar to bank deposit rates.
Banking Group emphasized that they support the establishment of a permanent and comprehensive regulatory framework for digital asset markets, noting that the current version of the CLARITY Act fails to provide sufficient protection to prevent stablecoins from causing bank deposits to be withdrawn from the banking system.
The content of this article does not constitute investment advice.
