Banks Fight Stablecoin Yield Compromise in Senate Bill

American Bankers Association CEO Rob Nichols sent an emergency letter to bank CEOs on May 11 urging immediate action against a "stablecoin yield loophole" in the Digital Asset Market Clarity Act [1]. The outreach came days before the Senate Banking Committee scheduled a markup for the bill on May 14 [1]. Nichols warned that without further changes, the proposal would incentivize a flight of bank deposits into payment stablecoins, posing risks to economic growth and financial stability [1].

Banking groups cite a Treasury Department report estimating that stablecoins could lead to $6.6 trillion in deposit outflows if yield is permitted [1]. The White House Council of Economic Advisers countered in April that prohibiting stablecoin yield would increase bank lending by only 0.02%, or roughly $2.1 billion [1][2].

The bill currently includes a compromise negotiated by Sens. Thom Tillis and Angela Alsobrooks that bans passive yield on idle balances while allowing activity-based rewards [1][2]. Coinbase Chief Legal Officer Paul Grewal and Sen. Bernie Moreno argued the banking lobby is opposing a deal that already restricts the yield mechanisms banks feared [1]. Some analysts suggest the industry’s $187 billion in annual interchange and payment-processing fees, rather than lending capacity, is the revenue line actually threatened by stablecoin rails [2].

If the pressure campaign succeeds in sinking the bill, banks could be left facing a rulemaking fight under the GENIUS Act that offers far less protection than the current compromise [2].