Bank Groups Warn Senate Stablecoin Fix Could Spur Deposit Flight

Five U.S. banking trade groups on Monday said a Senate compromise to limit stablecoin rewards “falls short” and could encourage deposits to move from banks to crypto platforms. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America called for stronger language to block interest-like payments.

Senators Angela Alsobrooks, D-Md., and Thom Tillis, R-N.C., finalized the compromise after months of talks with the White House, the banking industry and crypto firms. The draft bars “covered parties” from paying any form of interest or yield to U.S. customers solely for holding stablecoins or anything “economically or functionally equivalent” to bank deposit interest, while allowing activity- or transaction-based rewards tied to bona fide activities.

The trade associations said carve-outs in the text could let exchanges and platforms design incentives that replicate deposit interest. They highlighted provisions that would allow rewards to be calculated by “reference to duration, balance and tenure” or routed through membership organizations, warning those structures could incentivize holding stablecoins for long periods and undermine the prohibition's goal of deterring deposit flight.

“Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal — prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal,” the groups said, and added they will provide lawmakers detailed suggestions to tighten the draft.

Sen. Tillis posted on X that he and Sen. Alsobrooks worked with stakeholders for months and described the result as a “substantially improved, consensus-based product.” He said the compromise prevents stablecoin rewards from resembling interest on bank deposits and that some in the banking industry may disagree with the outcome.

The compromise is tied to broader efforts to pass a federal crypto market structure bill that would divide oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission. Lawmakers previously delayed a Senate Banking Committee hearing after a major crypto exchange withdrew support over earlier reward language; that exchange later approved the revised text.

Remaining issues for lawmakers include addressing crypto-related conflicts of interest linked to President Donald Trump, concerns about illicit finance, and limited Senate floor time. The trade groups said they will continue working with Congress to refine the language to protect deposits that support local lending and economic activity.