The debate over the stablecoin yield provision in the CLARITY Act appears to be back on, with Senator Thom Tillis proposing a measure to address concerns about deposit flight. This comes as banking associations continue to push for stronger language in the crypto bill to address deposit flight risk, especially among community banks.
Sen. Tillis Proposes New Language In CLARITY Act
According to a Punchbowl report, Senator Tillis suggested including “circuit-breaker” language in the CLARITY Act to address concerns that stablecoin yields could lead to deposit flight. The senator explained that such a provision will enable bank regulators, such as the FDIC and OCC, to intervene if they see evidence of systemwide deposit flight to crypto.
It is worth noting that Senator Tillis and Angela Alsobrooks had led negotiations between the banking and crypto industries, resulting in a compromise under which crypto firms could pay only activity-based rewards. However, banking associations continue to push for a stronger language that addresses their concerns about deposit flight.
As CoinGape reported, these banking groups warned that the CLARITY Act still leaves loopholes in stablecoin regulation. The banks argue that the current language used in the bill is too ambiguous, and it could encourage people to move away from making deposits with banks to holding stablecoins
The stablecoin isn’t the only issue hindering the crypto bill’s passage, as Democrats also push for an ethics provision to curb President Trump’s involvement in crypto. Amid this, the CLARITY Act odds have fallen to a new low as Senator Elizabeth Warren urged her colleagues to add ethics rules in the crypto bill ahead of a potential vote.
Senate Plans To Introduce Bill’s Text Soon
During an interview on FOX Business today, pro-crypto Senator Cynthia Lummis said that they plan to introduce the CLARITY Act text in the next few days. “This is about helping law enforcement fight illicit finance, passing consumer protections and keeping these markets onshore in the US,” she said.
This follows an earlier report that the Senate plans the crypto bill’s floor vote by the end of this month. Senator Lummis said that she expects the bill to be on the Senate floor by the week of June 20th.
However, she noted that the final decision lies with Majority Leader Senator John Thune, who is responsible for bringing a bill to the Senate floor. The crypto bill is currently facing a race against time before the Senate goes on its August recess. Senator Thune had said that he hopes to bring the bill to the floor before August, although they have yet to reach a bipartisan deal.
