Banks push Senate to tighten stablecoin rules

• Eight US banking groups have urged the Senate to tighten stablecoin reward rules.
• The groups have challenged proposed protections against stablecoin-driven deposit losses.
• The dispute has intensified before the Senate's planned Clarity Act vote.

Eight US banking groups have urged the Senate to tighten stablecoin reward restrictions in the Clarity Act.

The groups have argued that current language could still allow crypto firms to offer interest-like rewards.

“A circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all,” the groups wrote.

The proposed circuit breaker could allow regulators to act if stablecoins cause substantial losses at community banks.

The groups have also asked lawmakers to remove rewards linked to how many stablecoins customers hold and how long they hold them.

Treasury Secretary Scott Bessent has defended the provision, saying regulators would have tools to protect community banks if stablecoins cause harm.

The debate has centred on whether stablecoin rewards could pull deposits from banks, with crypto advocates disputing that risk and lawmakers preparing for the Clarity Act vote.