The critical CLARITY Act faces challenges as banking associations push Senate leaders to revise the proposed regulations on stablecoin yield provisions. With the merged draft expected to be released soon, opposition from these groups, including the American Bankers Association and the Independent Community Bankers of America, is intensifying, particularly against Section 404.

Galaxy Research has reduced the likelihood of the bill's passage from 60% to 50%, citing stalled negotiations among Senate committees. The banking lobby is concerned that stablecoin yield provisions allow crypto firms to replicate traditional bank deposit functions without the same regulatory oversight.

In a message sent on July 13, 2026, these banking groups insisted that without modifications to Section 404, they would continue their opposition. They argue that if stablecoin issuers can offer returns that resemble interest on deposits, consumers may prefer parking funds in USDC rather than traditional checking accounts, potentially undermining the banking sector.

For context, Coinbase reported approximately $1.35 billion in revenue from stablecoins in 2025, primarily through its USDC partnership with Circle. Unlike banks, stablecoin issuers do not have FDIC insurance or capital requirements, raising alarms among financial institutions.

Coinbase and Circle counter that the rewards associated with stablecoins differ fundamentally from traditional interest payments. As the bill progresses, the House passed H.R. 3633 on July 17, 2025, with a bipartisan vote of 294-134, while the Senate Banking Committee advanced the legislation on May 14, 2026.

The CLARITY Act designates regulatory authority between the SEC and CFTC, categorizing tokens as securities under SEC oversight and digital commodities under CFTC jurisdiction. It also outlines regulations for digital asset platforms, intermediary oversight, and anti-money laundering compliance.

As the Senate Banking and Agriculture Committee staff work on a merged draft, potential floor action could take place before the upcoming August recess. Concerns have also arisen regarding law enforcement officials profiting from digital asset holdings, complicating legislative discussions.

This material is for informational purposes only and does not constitute financial advice.