US Banking Sector Urges Senate to Strengthen Yield Bans and Deposit Flight Protections in 'Stablecoin Clarity Act'

On July 13, 2026, the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) sent a joint letter to the leadership of the Senate Banking Committee, strongly requesting a significant strengthening of the regulatory provisions in the 'Clarity for Payment Stablecoins Act' currently under deliberation. These organizations warned that stablecoins could function as substitutes for traditional bank deposits, leading to a 'deposit flight' phenomenon where large amounts of funds leave community banks.

This move by the banking sector has the character of an ultimatum that goes beyond simple bill amendments. In letters delivered on July 13 and 14, 2026, banking groups emphasized the need for more robust 'prohibition on offering yields' provisions to prevent stablecoins from operating like 'shadow banking' accounts. They maintain that legal mechanisms must be established to prevent stablecoin issuers from providing actual interest or returns, thereby blocking unfair competition with traditional savings accounts.

The current structure of the bill risks allowing stablecoins to replace bank deposits, which could seriously undermine the stability of community banks, the backbone of local economies.

Local community banks operate by providing loans to small businesses and households within their regions based on customer deposits. However, if stablecoins that promise high yields or maximized liquidity proliferate, the phenomenon of customers withdrawing bank deposits to move them into digital assets could accelerate. The banking sector argued that such fund outflows would eventually weaken the lending capacity of the local financial ecosystem and amplify instability across the entire financial system.

Legislative Process: From House Passage to the Senate Floor

The Clarity for Payment Stablecoins Act has already undergone a significant legislative process. On July 17, 2025, the bill passed the U.S. House of Representatives with overwhelming bipartisan support, with 294 votes in favor and 134 against. However, the legislative pace slowed down in the Senate as a more cautious review followed. After the Senate Banking Committee postponed the review for further deliberation in January 2026, it only moved to the next stage in May.

• July 17, 2025: Passed the U.S. House of Representatives plenary session (294 in favor, 134 against)
• January 2026: Senate Banking Committee postponed bill review for further deliberation
• May 14, 2026: Passed Senate Banking Committee markup (15 in favor, 9 against)
• July 13, 2026: Major banking groups sent a letter to the Senate demanding stronger yield regulations

The debate over the prohibition of yields is a core issue in this demand for stronger regulation. Banking groups have demanded an explicit ban on stablecoin issuers distributing profits generated from held reserve assets to users or providing interest-like benefits. This measure is intended to fundamentally prevent stablecoins from transforming beyond simple payment methods into investment products that compete directly with the banking system.

As of mid-2026, the stablecoin market size has surpassed approximately $320 billion, approaching an all-time high. In particular, Tether (USDT) occupies a dominant position with a 58.29% share of the total market, and major issuers including Circle (USDC) control more than 80% of the market. This massive scale of capital suggests that stablecoins have grown to a size that can pose a real threat to the existing financial sector, rather than being just experimental assets.

Another key aspect of the bill is the separation of powers between the Federal Reserve (Fed) and state regulatory agencies. The Clarity Act stipulates that the Federal Reserve exercise strong supervisory authority over payment stablecoin issuers. The banking sector expects that only when such a federal-level supervisory system is established will stablecoin issuers meet soundness and capital requirements comparable to those of the traditional financial sector.

On the other hand, the cryptocurrency industry expressed concern that these demands from the banking sector could hinder innovation. While industry officials agree that a 'sustainable legislative foundation' is necessary for stablecoins to become essential infrastructure in the digital economy, they countered that overly strict yield restrictions could reduce user benefits and undermine market dynamism. The conflict of interests between these industries is the background behind the more intense discussions in the Senate compared to when the bill passed the House in 2025.

Future Outlook and Key Points to Watch

• Confirmation of the Senate plenary vote schedule and whether yield-related amendments are reflected
• Announcement of official positions by the U.S. Treasury and the Federal Reserve on the banking sector's demands
• Monitoring trends in regional bank deposit balance fluctuations following the increase in stablecoin market capitalization
• Adjustment of regulatory intensity that may occur during the final bill reconciliation process between the House and the Senate

Ultimately, the final form of the 'Clarity for Payment Stablecoins Act' is expected to be determined at a balance point between the two values of maintaining traditional financial stability and encouraging innovation in the digital asset industry. As of July 2026, how the strong pressure from the banking sector affects Senate discussions is expected to be a decisive variable in determining the future regulatory landscape of the U.S. digital dollar.