The U.S. Senate is about to conduct a key procedural vote on Clarity Act, and the disagreements between the banking industry and the crypto industry regarding stablecoin incentive clauses are intensifying. Eight banking organizations believe that the revised bill may still allow issuers to provide incentives in the form of rewards.Class deposit interest, thereby attracting funds to flow out of the banking system.

The banking industry requests to amend the reward provisions.

The co-signing organizations include the Bankers Association of America, the Bank Policy Institute, and the Independent Community Banks Association of America, covering both large banks and community banks. In a letter to Senate leaders, they stated that although the bill attempts to distinguish between stablecoin rewards and traditional interest, the current wording still allows for loopholes to be exploited.

The banking industry requests the removal of the “solely” phrase from the restrictive provisions and hopes to change the “equivalent” standard to a “substantially similar” standard. According to them, this would allow incentive arrangements that differ in form but have similar effects to deposit interest to be included within the scope of these restrictions.

The balance and holding period are points of contention.

The banking industry also requires the removal of an exception clause. This clause allowed certain rewards that could otherwise be granted to be linked to the customer's account balance, duration of holding, or account tenure. Banking organizations believe that these indicators are already common bases for calculating interest, and retaining this exception would weaken the previous restrictions.

They claim that such incentives may draw funds that would otherwise remain in banks towards payment-style stablecoins, thereby affecting the banks' ability to provide financing for housing mortgages, agriculture, and small businesses. The letter specifically mentions that community banks and local banks are more likely to be able to withstand such pressures.

The 'circuit breaker' was said to have been activated too late.

In addition to the reward provisions, the banking industry also opposes the 'circuit breaker' mechanism for deposit outflows stipulated in the bill. They argue that this mechanism is only triggered after a large amount of deposits have already flowed out, making it difficult to serve as a preventive measure, and therefore cannot be considered an effective safeguard.

This is not the first time the banking industry has made similar demands. In May of this year, six banking organizations already put forward similar requests. As the Senate is about to vote on the revised version of the Clarity Act, the debate over whether stablecoin rewards should be considered a form of disguised interest is becoming one of the focal points before the bill is advanced.