Senate panel considers CLARITY Act as banking groups propose stablecoin yield changes

The Senate Banking Committee is gearing up to mark up the CLARITY Act, and the banking industry wants to make sure stablecoins dont start looking too much like savings accounts. A coalition of major banking groups, including the American Bankers Association, is lobbying hard against provisions that would allow stablecoin issuers to offer anything resembling interest payments to holders.

The Tillis-Alsobrooks compromise

Senators Thom Tillis and Angela Alsobrooks brokered a bipartisan deal that attempts to split the difference. The compromise prohibits passive interest-like yields on payment stablecoins, the kind of set-it-and-forget-it returns that would make a stablecoin functionally identical to a bank deposit. What it does allow: activity-based rewards tied to trading or platform usage.

Senator Tillis framed the compromise as a firewall. The deal, he stated, prevents stablecoin rewards from mimicking bank deposit interest.

The banking coalition specifically targeted Section 404 of the bill. Their argument: the provision as originally written risks deposit flight and could undermine the capital base that community banks and regional lenders depend on.

Legislative timeline and momentum

The Senate Banking Committee has scheduled its markup for the week of May 11, with a potential committee vote targeted for May 14, 2026. Senate leadership is pushing for expedited passage, aiming to get the bill to a full Senate floor vote by mid-May.

The CLARITY Act already cleared a significant hurdle in the House, which passed its version in July 2025 with a bipartisan 294-134 vote. The yield question—specifically how much return stablecoin issuers should be allowed to offer holders—became the sticking point that delayed Senate action for months.

The broader goal of the legislation is to establish a clear regulatory framework for stablecoin issuers. Right now, stablecoin regulation in the US is a patchwork of state-level money transmitter licenses and informal federal guidance. The CLARITY Act would create a unified federal framework, giving issuers a single set of rules to follow rather than navigating 50 different state regimes.

What this means for investors and the stablecoin market

The yield restriction, if it survives markup, would reshape how stablecoin issuers compete for users. Companies like Circle and Tether currently dont pass through the interest they earn on reserve assets to stablecoin holders. Newer entrants and DeFi protocols have been experimenting with yield-bearing stablecoins, and those products would face significant constraints under the Tillis-Alsobrooks framework.

For traditional banks, the compromise is a partial win. They wanted a complete ban on stablecoin yield. They got a ban on the type of yield that most directly competes with deposit accounts. The activity-based rewards carve-out still creates competitive pressure, but its the kind of pressure banks are more accustomed to managing.

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