Banks oppose CLARITY Act’s stablecoin yield compromise

The Bank Policy Institute issued a statement on July 23 opposing the latest CLARITY Act draft, calling its stablecoin yield and illicit finance provisions “shortcomings” that should be “strengthened.” The draft’s Section 404 bans passive yield on idle stablecoin balances while allowing incentives tied to account activity.

Banking groups sought a total ban on any form of stablecoin yield or incentive and lobbied lawmakers, including Senators John Curtis (R-Utah) and John Cornyn (R-Texas), who have raised concerns about the draft.

Senate arithmetic has shifted since the start of the month. Before the death of Sen. Lindsey Graham and the extended illness of Sen. Mitch McConnell, Republicans held 53 seats. With one vacancy and McConnell sidelined, the effective Republican count is 51. If Senators Curtis and Cornyn withhold support, Republican backing would fall to 49, which would require 11 Democrats to support cloture at 60 votes.

Some Democrats who have shown interest in crypto policy have also objected. Senators Angela Alsobrooks (D-Md.) and Ruben Gallego (D-Ariz.) criticized the draft for what they view as weak ethics language and insufficient illicit finance controls. White House officials and bill supporters contend recent ethics changes address those concerns.

Timing is tight. With roughly two weeks before the Senate breaks for its August recess, Senate Majority Leader John Thune warned: “I don’t think we’ll be able to get them done. I would like to get at least CLARITY started. We’ll see where the votes are.”

White House Chief Crypto Advisor Patrick Witt urged a vote to avoid delays, adding, “You’d be waiting forever,” and saying the updated ethics provision “had real teeth” and included the President.

Market measures reacted to the uncertainty. A prediction market briefly lowered the odds of the CLARITY Act passing in 2026 to about 32 percent on Friday.

The CLARITY Act would create a federal framework for stablecoins and other digital-asset activity, setting rules for issuers, custody and consumer protections. A central dispute is whether holders should earn yield on idle stablecoin balances; the draft permits activity-based incentives but bans passive yield.

Legislators have about two weeks before the August recess to resolve open issues and schedule a potential cloture vote.