American Bankers Association Backs Clarity Act, Seeks Tighter Curbs on Stablecoin Rewards

The American Bankers Association has backed the Clarity Act, legislation aimed at establishing a regulatory framework for the cryptocurrency market.

BlockBeats and other outlets reported on August 19 that ABA President and Chief Executive Officer Rob Nichols recently said the group’s goal is not to block the bill’s passage but to strengthen it. The US can remain the center of the global banking industry while also becoming a global hub for crypto, he said, but that will require clear and consistent regulation.

Nichols agreed that the crypto industry needs a clear regulatory framework. He added that rewards paid to stablecoin holders could effectively function like interest on bank deposits.

The Genius Act, a US stablecoin law enacted last year, prohibits stablecoin issuers from paying interest or yield. One of the disputes surrounding the Clarity Act is whether crypto exchanges or affiliated companies, rather than issuers themselves, could offer similar interest-like rewards.

The ABA argues that stablecoins could drain banks’ deposit base if they attract funds with higher rewards. That, in turn, could reduce banks’ lending capacity and curb funding for small-business loans and mortgages.

The group says the Clarity Act should explicitly bar stablecoin rewards that are effectively similar to interest payments. It also argues that some language open to multiple interpretations should be removed.

Nichols said the proposed changes would not ban all reward programs offered by crypto companies.