Banks want "solely" struck from the CLARITY Act before Tuesday's cloture vote

A word carries this much weight because the 2025 GENIUS Act already stops stablecoin issuers from paying interest or yield directly. The White House's analysis found the statute does not explicitly bar affiliates and other third parties from distributing rewards ^[15][16]. What the CLARITY text decides is how much room those arrangements keep ^[32]. "We support this distinction in principle, although we believe that the way the current legislative text is drafted provides loopholes and avenues for the prohibition to be easily evaded that would still allow interest and interest-like payments to be made on stablecoin balances," the groups wrote ^[8].

Their objection to the carve-out is mechanical. "Given that interest payments are often calculated by reference to duration, balance and tenure, this subsection appears to contradict the initial prohibition," the groups wrote ^[7]. On the safeguard the drafters added instead, they wrote that "a circuit breaker that activates only after substantial deposit flight has already occurred is not a safeguard at all" ^[9]. The letter renews demands six banking trade groups made in May, and eighty state bankers' associations joined the call for tighter language on September 10, according to the ABA Banking Journal ^[13][12].

The money does move the way the banks describe. Deposits fund loans, and Cryptopolitan reported in May that US banks use about 80% of deposits to finance lending, so the money that leaves a deposit account is money not lent against mortgages, farms and small businesses ^[22][27]. What they dispute is how big it is. The White House Council of Economic Advisers estimated in April that banning stablecoin yield outright would raise bank lending by $2.1 billion, or 0.02%, alongside a net welfare loss of $800 million ^[17]. A $2.1 billion gain worth 0.02% implies a lending base near $10.5 trillion ^[28]. Community banks, the constituency the circuit breaker is written for, would get about $500 million of that, a shade under a quarter ^[18][29]. Set against the roughly $300 billion stablecoin market the IMF counted in August, the entire lending gain is 0.7% ^[20][31].

The banks are not arguing from that base case. The CEA also ran assumptions it described as nearly unrealistic, including stablecoin usage about six times today's and a transformation of Fed monetary policy. That run produced a 4.4% increase in bank lending, 220 times the base estimate ^[19][30].

The revised text released Sunday carries 126 significant amendments sought by Democrats, according to Reuters ^[23]. Senator Cynthia Lummis said the bill is now ready to advance, while Senator Elizabeth Warren's staff called the ethics changes "empty" ^[24][25]. Goldman Sachs, BNY and Morgan Stanley backed the legislation, according to Cryptopolitan, against the retail-facing trade groups ^[26].

If the rewards language survives to passage, the circuit breaker becomes the operative protection, and the argument moves from statutory drafting to whatever supervisors decide significant harm to community-bank deposits means ^[3]. If cloture fails, the "substantially similar" test is the cheapest concession available to the drafters ^[5]. In my view the banks lose the wording and keep the trigger. A $2.1 billion lending gain will not carry an up-front prohibition, and the letter gives no estimate of potential outflows and no evidence that the predicted lending reductions have happened ^[17][14]. What would overturn that: community-bank deposit balances falling measurably while third-party reward programmes scale, before any regulator has grounds to act.