Banking Groups Push Back on CLARITY Act Stablecoin Yield Rules Again

With a Senate vote on the CLARITY Act potentially scheduled before the August 8 recess, the stablecoin accounting implications of the bill's yield provisions are coming into sharp focus. The American Bankers Association, the Independent Community Bankers of America, and 76 state banking associations have written to senators for the second time, pressing for tighter language around stablecoin rewards. Their concern is not abstract: the current draft, they argue, contains loopholes wide enough to allow stablecoin issuers to pay what are effectively interest-like returns while staying technically compliant. For accounting firms and CFOs with any exposure to USDC, USDT, or other dollar-pegged tokens, the outcome of this debate will directly shape how stablecoin positions are classified, disclosed, and taxed.

What the Banking Groups Are Asking For

The joint letter centres on two specific drafting problems in the current text. Understanding both is essential for anyone working through stablecoin accounting treatment right now, because each problem creates a different category of compliance risk.

The "Solely" Problem

The bill currently prohibits interest-like rewards that are offered "solely" in connection with holding a stablecoin. The banking groups want the word "solely" removed entirely. Their argument is straightforward: keeping it in the text invites creative structuring that sidesteps the intent of the ban without violating its letter. As the letter notes, a stablecoin issuer could require a holder to execute a single crypto trade within a defined period, say every six months, and then classify any yield paid as a reward for activity rather than a return on holding. The economic substance remains identical to interest; the legal form does not. That gap matters enormously for stablecoin accounting, because the classification of a payment as "interest" versus "reward" or "incentive" carries different revenue recognition, tax, and disclosure obligations under both US GAAP and the Internal Revenue Code.

The Balance, Duration, and Tenure Clause

The second concern is arguably more fundamental. A separate clause in the current draft explicitly permits rewards linked to a holder's balance size, the duration of the holding, and the tenure of the customer relationship. Those are precisely the three variables that define how interest is calculated on any conventional deposit product. If a stablecoin issuer can pay a reward that scales with how much you hold, for how long, and how loyal a customer you are, the functional difference between that reward and a deposit interest rate becomes difficult to articulate. The banking groups read this clause as directly undermining the interest ban the bill is supposed to impose, and they want it removed or substantially redrafted.

Where the Legislation Stands

The CLARITY Act cleared the Senate Banking Committee in May with a 15-to-9 vote, picking up support from two Democratic members. A Senate floor vote is being targeted for before the August 8 recess, which makes the next few weeks a critical window for both legislative and compliance preparation. According to reporting by Ledger Insights, a fresh draft of the bill may be released within days of this writing.

Political Headwinds for the Banking Groups

The political dynamics are not straightforwardly favourable to the banks. The White House crypto adviser responded to the banking groups' latest letter on X with language that suggested the rewards issue is considered closed from the administration's perspective. Senators appear to have shifted attention to other contested provisions of the bill, treating the stablecoin yield question as resolved. That political posture means the banking groups are fighting on at least two fronts simultaneously: winning the substantive argument and recapturing the legislative bandwidth to reopen a debate that key stakeholders want to treat as settled. For accounting firms advising clients, this political dynamic is itself a risk factor: if the "solely" language and the balance-duration-tenure clause survive into the final text, compliance strategy will need to be built around the law as enacted rather than as the banks would prefer it.

Stablecoin Accounting Implications for Accounting Firms and CFOs

The stablecoin accounting question here is not theoretical. Under current US GAAP, the Financial Accounting Standards Board's ASU 2023-08 requires entities to measure certain crypto assets at fair value with changes recognised in net income each period. Stablecoins pegged to the US dollar typically trade at or near par, so fair value measurement alone produces limited volatility in the income statement. The real complexity arises when yield-like payments enter the picture.

Revenue Recognition and Classification

If a payment received on a stablecoin holding is classified as interest income, it must be recognised under ASC 835 or the interest income provisions of ASC 310, depending on the nature of the arrangement. If it is classified as a "reward" or an incentive payment, the accounting treatment diverges: it may fall under ASC 606 (revenue from contracts with customers) if it is tied to a performance obligation, or it may be classified as other income with a different disclosure footprint. The ambiguity the banking groups are flagging in the CLARITY Act text will, if left unresolved, create exactly this classification problem at scale. Accounting firms and CFOs should already be documenting the economic substance of any yield-like payments their stablecoin positions generate, irrespective of how those payments are labelled contractually.

Tax Treatment: Interest vs. Other Income

From a US federal tax perspective, the classification question carries its own consequences. Interest income on deposits and debt instruments is taxed as ordinary income and reported on Form 1099-INT. Rewards and incentives linked to activity may be treated differently, potentially as ordinary income on a 1099-MISC or as a rebate that reduces cost basis, depending on the facts and circumstances. The IRS has not issued specific guidance on stablecoin rewards structured to avoid the interest characterisation, which means the lack of precise legislative language in the CLARITY Act will translate directly into tax uncertainty until either the statute is clarified or the IRS acts. For CFOs running treasury operations with stablecoin balances, the risk is a mismatch between how the issuer reports a payment and how the IRS ultimately characterises it.

Audit and Disclosure Considerations

For accounting firms conducting audits of entities that hold or issue stablecoins, the unresolved yield question creates a disclosure challenge under ASC 275 (risks and uncertainties) and may affect going-concern assessments for stablecoin issuers whose revenue model depends on retaining the ability to pay rewards. Auditors should be pressing management to articulate the accounting policy they will apply to stablecoin rewards now, before the final legislative text is set, so that any required policy change post-enactment can be scoped and communicated to audit committees promptly.

What Accounting Firms and CFOs Should Do Now

The window between now and a potential Senate vote is narrow, but it is enough time to take preparatory steps that will reduce scramble costs if the bill passes in its current form.

Immediate Actions

First, map every stablecoin position on the balance sheet and identify whether any associated payments from issuers are currently being received or are anticipated under existing terms of service. Second, review the contractual documentation from each stablecoin issuer to understand how those payments are described. Third, consult with tax counsel on the IRS characterisation risk for each payment type, given the absence of specific guidance. Fourth, prepare a short-form accounting policy memo that sets out your current classification rationale, so that auditors have a documented basis to review and so that any change in position post-legislation can be properly disclosed as a change in accounting estimate or policy as appropriate. Fifth, monitor the CLARITY Act draft releases closely. When the updated text drops, the specific wording of the rewards provisions will need to be read against the banking groups' two objections to determine whether the loopholes have been closed.

For broader context on how the CLARITY Act has developed and the range of compliance questions it raises, see our CLARITY Act legislative tracker for accounting firms and CFOs. For the earlier history of this specific yield dispute, our earlier breakdown of the ABA and state banking groups' initial challenge provides the full background. Keeping current with both threads matters because the two objections the banks are raising now build directly on arguments made in the first letter, and the legislative response to the first letter appears to have been the introduction of the balance-duration-tenure clause that the banks now regard as making things worse.

The Bigger Picture for US Stablecoin Regulation

The CLARITY Act is one of two major stablecoin bills moving through Congress. Its passage in any form will set the first federal framework for stablecoin issuance in the United States, and the yield provisions will be among the most consequential clauses for the competitive landscape between bank deposit products and stablecoin holdings. The banking industry's concern is ultimately about disintermediation: if stablecoin issuers can pay returns that are economically equivalent to deposit interest rates, they compete directly with insured deposits without being subject to the same regulatory constraints. That competitive concern is legitimate from a systemic perspective, but it also shapes the stablecoin accounting environment in ways that matter well beyond the banks themselves. Any entity holding stablecoins for treasury purposes, processing stablecoin payments, or auditing firms that do either of those things, needs to understand that the final yield language will affect how those positions are accounted for and taxed. The current draft does not resolve that question cleanly, and the banking groups' letter is a signal that the professional and regulatory community has not accepted the current wording as adequate.

Source: Ledger Insights