CLARITY Act: Banking Lobby Targets Stablecoin Bill in Crypto Policy War

Five of the most powerful banking trade groups in the United States are allegedly running a coordinated campaign to kill the CLARITY Act. This is likely happening even as Senate lawmakers lock in a committee markup for the week of May 11, which targets President Trump’s desk before July 4.

The American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America issued a joint rejection of the Tillis-Alsobrooks stablecoin compromise language. The same compromise their representatives helped negotiate over months of closed-door talks.

The TradFi vs DeFi fault line running through crypto policy has never been more visible. With the CLARITY Act advancing through the Senate and institutional capital watching every procedural move, the banking lobby’s last-ditch push to stall stablecoin regulation is setting up a defining confrontation in American financial policy.

Banks Claim a 20% Capital Drain, But…

The banking coalition’s stated objection centers on Section 404 of the CLARITY Act, which governs yield restrictions on payment stablecoins. The coalition argues the Tillis-Alsobrooks language contains loopholes, specifically that digital asset exchanges can still distribute rewards tied to customer tenure, account balances, and duration, even if those rewards aren’t technically labeled as interest.

It is reported that banks’ internal research claims yield-bearing stablecoin alternatives could siphon enough liquidity to reduce available capital for consumer, small-business, and agricultural loans by as much as 20%.

The American Bankers Association escalated beyond lobbying on May 6, launching targeted Washington, D.C., media ads, funded by over 3,000 member banks at an estimated $2.5 million budget, framing stablecoin yield mechanisms as “unregulated deposit theft.” A planned Capitol Hill fly-in with 200 bank CEOs on May 9 is designed to apply direct pressure on Senate offices before amendments close on May 10.

The coalition also points to a 2026 OCC report estimating $300 billion in deposit flight risk by 2028 if Section 404 loopholes go unaddressed, and Federal Reserve data showing $120 billion in crypto stablecoin reserves already mirroring money market fund yields.

Senator Tillis, who co-authored the compromise, pushed back directly, stating that traditional financial stakeholders had a seat at the negotiating table for months, that the current text explicitly prohibits stablecoin rewards from functionally mimicking bank deposit interest. The senator also noted that certain factions may simply oppose any passage of the CLARITY Act, using the stablecoin yield debate as a mechanism to stall the bill indefinitely.

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Crypto Industry Sees $1 Trillion on the Line, and CLARITY Act Obstruction in Plain Sight

The crypto industry’s read on the banking lobby’s strategy is blunt. Alex Thorn, head of research at Galaxy Digital, noted that Senator Tillis absorbed significant criticism from the digital asset sector specifically for bringing banks into the negotiation in the first place, and that the coalition’s rejection of the resulting concessions exposes an underlying strategy of obstruction rather than constructive amendment.

Galaxy Digital analysts also project that CLARITY Act passage could unlock $1 trillion in institutional inflows by establishing the regulatory certainty that has kept major capital on the sidelines.

Coinbase CEO Brian Armstrong called the banks’ tactics “anti-competitive sabotage”, arguing that yield restrictions would stifle user incentives for 15 million U.S. stablecoin holders already accustomed to real-world stablecoin utility in payments and settlements.

White House Crypto Czar David Sacks sharpened the administration’s position, stating that “banks’ greed or ignorance is blocking America’s digital future” and confirming Trump administration backing for the bill.

Senator Cynthia Lummis, chair of the Senate Banking Subcommittee on Digital Assets, issued the starkest call yet:

“The digital asset industry has waited long enough. Businesses are making decisions where to build RIGHT NOW, and without clear rules, too many will go overseas. We must get Clarity done now. America’s financial future depends on it.”

The banking lobby is not fighting a loophole. It is fighting a bill that works.

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