77 state banking associations seek changes to CLARITY legislation to ban balance-based stablecoin rewards

Nearly every state banking association in the country just teamed up to tell the Senate that stablecoin rewards programs are a threat to community banking. Seventy-seven state banking associations, backed by the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA), sent a letter to Senate leadership on September 10 requesting amendments to the CLARITY Act that would effectively ban rewards tied to stablecoin balances or holding duration. The target, though never named quite so bluntly, is obvious: Coinbase’s USDC rewards program, which pays users for simply holding the dollar-pegged stablecoin. The banking lobby wants that kind of incentive treated the same way regulators treat interest on deposits, meaning it shouldn’t exist outside the traditional banking system. What the banking lobby wants changed The letter zeroes in on two specific provisions. The coalition is requesting amendments to Section 10404(c)(1) and the outright deletion of subsection 10404(3)(B) of the CLARITY Act. In plain terms, the existing bill language appears to leave room for stablecoin issuers to offer “activity-based rewards” that banking groups argue function as de fac...