Bankers aren’t backing down.
Members of the American Bankers Association, a banking lobbying group, framed stablecoins as an existential threat to their business models during the ABA’s summit that drew some 1,400 finance leaders to Washington on Tuesday.
“It would be extremely detrimental should our deposits be cut back, especially in our rural and local communities,” said Cathy Owen, the ABA’s chair-elect.
She was joined by the ABA’s digital assets expert Brooke Ybarra who said that a “stablecoin held in a digital wallet does not contribute to economic growth in a community.”
The ABA’s renewed offensive — warning of deposit flight, lending stress and disintermediation — comes as the Clarity Act, a bill that would create a long-sought regulatory framework for cryptocurrencies in the US, has been hamstrung.
The timing is crucial. The new attack comes months before US midterms in November that threaten to freeze legislative progress altogether.
With Republicans facing a difficult electoral map and internal party divisions simmering, the fight over stablecoin rewards has become a prime obstacle blocking the bill’s advance despite US President Donald Trump’s blessing.
The Senate Banking Committee has yet to resume public debate after negotiations of the bill fell apart earlier this year. Republican Senator Thom Tillis, seen as a key swing vote, is weighing the deposit flight argument carefully.
But it’s not just the bill banks oppose to. The banking lobby has also swiped at Kraken and the Federal Reserve after the crypto exchange was granted access to the same payments rail that thousands of banks and credit unions use.
The threat is real. The crypto industry is increasingly getting legal and regulatory recognition, which has enabled it to encroach on what has traditionally been the $23 trillion US lending industry’s turf.
The ABA did not immediately reply to a request for comment from DL News.
What’s the issue?
At the centre of the clash is a deceptively simple question: can stablecoins pay yield?
Last year’s stablecoin-focused Genius Act signed by Trump banned issuers from offering interest on stablecoins, reflecting banks’ fear that customers would shift deposits into higher-yielding digital dollars.
But ambiguity remained over whether third-party platforms — exchanges and crypto companies — could offer rewards or incentives tied to stablecoin holdings.
Banks have pushed to close that perceived loophole in the Clarity Act. Crypto firms accuse them of attempting to relitigate settled law.
A January compromise draft tried to split the difference. It barred passive yield while allowing rewards linked to activity such as payments, transfers, remittances and providing liquidity in decentralised finance protocols. Crypto clarity was within reach.
The détente collapsed on the eve of a scheduled vote when Coinbase CEO Brian Armstrong withdrew support, objecting to the ban on passive yield. Senator Tim Scott, chair of the Senate Banking Committee, postponed the vote indefinitely.
Since then, negotiations have stalled, despite Trump weighing in on the subject.
“The Genius Act is being threatened and undermined by the banks, and that is unacceptable,” Trump said last week. “The US needs to get market structure done, ASAP.”
What can Trump do?
Ron Tarter, CEO of stablecoin issuer MNEE, told DL News that stablecoins “challenge that model” in which banks dominate.
Presidential firepower, he said previously, reshapes the debate around innovation and global competitiveness rather than risk alone.
“By publicly supporting stablecoin innovation and pushing stakeholders toward compromise, Trump is signalling that the US should compete in digital assets rather than regulate the industry out of the country,” Tarter said.
Ashley Ebersole, chief legal officer at real-world assets marketplace tx and a former SEC senior counsel, underscored the White House’s leverage.
“The president has a lot of levers that can be pulled,” he told DL News.
Yet political capital has limits.
“The weight of the president’s endorsement correlates with his political popularity at the time,” Ebersole said.
“It’s an interesting situation, because the banks are facing a White House that’s bullishly supportive of this challenger industry.”
Lance Datskoluo is DL News’ Europe-based markets correspondent. Got a tip? Email him at lance@dlnews.com.