Community Banks Warn Clarity Act Could Drain Up to $47 Billion in Deposits if Stablecoin Yield Clause Remains

In the ongoing legislative battle over stablecoins in the United States, traditional financial institutions are issuing increasingly stern warnings. Nate Franzén, a community banker from South Dakota, published an article on CoinDesk refuting the views of Summer Mersinger from the Blockchain Association. Mersinger previously emphasized that funds converted into stablecoins do not exit the financial system, as issuers still hold bank deposits or U.S. Treasury bonds as reserves. Franzén pointed out that this logic has a fatal blind spot at the micro-execution level.

Currently, there are approximately 4,500 banking institutions across the U.S., the vast majority of which are regional small banks. When customers convert $100,000 into stablecoins, issuers typically purchase Treasury bonds directly as the underlying asset. This process severs the chain of local credit intermediaries, causing community banks to lose their core funding source for regional loans, while the interest returns on Treasury bonds have no correlation to the local economy. For instance, in South Dakota, local community banks have approximately $47 billion in deposits. According to estimates from the American Bankers Association (ABA), without reasonable constraints, up to $4.7 billion in deposits could be siphoned off by stablecoins, directly leading to a $3.7 billion reduction in the state's lending capacity. This bleeding effect will severely hinder financing channels for local agriculture and small businesses.

Controversy Over Bill Language

The core issue of this controversy stems from the textual differences between two legislative proposals. The House version of the GENIUS Act **strictly prohibits stablecoin issuers from paying interest themselves; however, the Senate version, the Clarity Act, is quite vague in its definition of the "yield" clause. If not amended, digital wallets or trading platforms could easily distribute interest-like returns to users under the guise of "rewards." Franzén deeply analyzed the three major risks arising from this regulatory gray area:

• Creating unfair deposit competition: If consumers can earn several percentage points of return from stablecoins while maintaining exposure to the dollar and payment functionality, this product will directly become a substitute for bank deposits.

• Eroding the credit intermediary function: Stablecoin issuers only need to hold U.S. Treasury bonds to earn interest, completely avoiding the social credit-derived responsibility of converting funds into mortgages or business operating loans.

• Evading traditional financial regulation: These institutions cleverly bypass the stringent compliance reviews that traditional commercial banks must undergo, such as capital adequacy ratios, deposit insurance, and stress testing.

September Senate Vote as a Key Turning Point

This asymmetric competitive environment forces local banks, which adhere to compliance standards, to compete against digital products that effectively transfer Treasury bond yields. In response, industry insiders are calling for policies to strictly limit stablecoins to pure payment tools, resolutely eliminating any business models that utilize interest-like returns to construct high-yield deposit accounts outside the banking system. However, regular consumer rebates based on actual transaction frequencies (similar to credit card points) remain within a reasonable scope.

The Clarity Act is set to enter the final voting process in the Senate this September. The lobbying effort led by large banks since May, which firmly opposes the interest-earning mechanism for stablecoins, is far from over. Attention must be closely paid to whether the Senate can accurately eliminate the ambiguous definitions between "rewards" and "interest" in the final version.