Key Takeaways:
- Rejecting the Digital Asset Market Clarity Act over a rule, banks seek to prevent deposit flights.
- Eleanor Terrett notes big banks aren’t 100% aligned, so they will next lobby the Senate over market risks.
- On May 4, the American Bankers Association demanded a fix for a loophole enabling future stablecoin yields.
Banks Still Dissatisfied With Clarity Act Stablecoin Yield Compromise
The saga of the Digital Asset Market Clarity Act continues, as banks and crypto companies have not reached a compromise on stablecoin yields, which banks argue could upset the financial system and affect their business model.
Even after it was reported that Senators Thom Tillis and Angela Alsobrooks had reached an agreement on the language defining stablecoin yields, reports indicate that banks are still not entirely in agreement with it.
According to crypto journalist Eleanor Terrett, a divide is forming among banks, with big banks serving customers still not being fully 100% with the draft as redacted. Other financial institutions, including some community banks, would support the current wording, though.
Terret states that the issue is connected to the narrow language dealing with stablecoin rewards, which “still leaves room for crypto firms to work around the restriction.”
On social media, she declared that, in their view, “it’s not a true compromise because it doesn’t eliminate yield completely, it just changes how it’s offered.” Terrett added that banks might take this to other Senate Banking Committee members before markup.
In a joint statement issued on May 4, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America stressed that the proposed language “falls short” of “prohibiting the payment of yield and interest on stablecoins.”
The statement indicates that the language allows rewards to be calculated by reference to duration, balance, and tenure, which could incentivize idle holding of stablecoins for extended periods, negating the ultimate objective of avoiding deposit flight.
“This is a significant loophole that must be addressed,” the banks concluded.