Clarity Still Needs To Get Stablecoin Yield Right

As the Senate considers the next step for the Clarity Act today, one issue still needs to be resolved: stablecoin yield.

The latest legislative text still leaves open a path for stablecoin products to offer yield-like payments without the safeguards that apply to traditional deposit products. Whatever path the legislation takes from here, Congress should close that loophole before Clarity reaches the finish line.

What changed

• Very little on yield. The latest text adds a backstop that would allow Treasury to step in if deposits begin leaving certain banks for stablecoins on a substantial scale. But it does not resolve the underlying concern.
  

A backstop isn't enough

1. The text leaves room to offer yield-like payments. As written, the bill would still allow crypto platforms to work around the prohibitions and effectively offer interest-bearing accounts on stablecoins without the safeguards that apply to deposit products.
2. The backstop waits for harm to occur. Once a substantial amount of deposits leave, the damage to credit is already done. A backstop would arrive after a loan was forced to be denied.

What that means for credit:

If stablecoin products can compete for deposits by offering yield without equivalent rules and protections, the consequences do not stop with banks. Deposits help support the mortgages, small business loans, and other credit families and businesses rely on every day.

• Senators have been raising this for weeks: Sen. Josh Hawley (R-MO) and Sen. Jerry Moran(R-KS) have both raised concerns about the yield language and the potential impact of deposit flight on lending. As Hawley put it: "Farmers and ranchers, in particular, are very, very concerned that deposit flight in small towns could absolutely kill their ability to get ag loans."

Clearer rules for digital assets are important, but those rules should strengthen the entire financial system — not create an uneven playing field that pulls funding away from the credit families and businesses depend on. Any path forward on Clarity should close the stablecoin yield loophole.

Innovation should strengthen America’s entire financial system — not give one industry an advantage by allowing bank-like products to operate without comparable safeguards.

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