Citigroup backs Clarity Act progress as stablecoin reward debate pressures banks

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Citigroup backs Clarity Act progress

Highlights

Citigroup CEO Jane Fraser supports ongoing improvements to the Clarity Act but warns stablecoin-linked rewards could erode banks' funding and lending capabilities.
A bipartisan compromise bars rewards for holding stablecoins but allows transaction-based incentives, with Fraser expressing persistent concern for traditional lenders' balance sheets.
Procedural Senate vote expected next month may send Clarity Act back to the House, with industry and political divisions intensifying over implications for bank funding and digital asset competition.

Clarity Act debate centers on stablecoin rewards

As reported by The Block, Fraser says in a Fox Business interview on Thursday morning that Citigroup continues to seek improvements to the Clarity Act but still wants a workable bill to pass. She says legislation would be positive for the financial system overall, even though she remains concerned about how the bill handles rewards tied to stablecoins.

Fraser says reward systems linked to deposits could hurt banks' funding bases and, in turn, their capacity to provide lending and credit access in parts of the U.S. that crypto firms and large banks do not fully serve. The dispute over stablecoin yields has remained a recurring issue in negotiations over the past year, with banks warning about deposit outflows while crypto companies argue restrictions would curb innovation.

A compromise brokered by Sens. Angela Alsobrooks and Thom Tillis says platforms cannot pay rewards simply for holding the asset, while allowing rewards tied to transactions and payments. Even so, Fraser says the remaining structure still raises concerns for traditional lenders.

Banking and crypto sectors prepare for next vote

Political and industry pressure is building ahead of a procedural vote next month and a possible return of the bill to the House if it passes the Senate. The issue is also exposing divisions among Republicans who have traditionally aligned with banks but are now weighing support for the crypto sector.

Other banking leaders are taking a tougher stance than Citigroup. JPMorgan Chase CEO Jamie Dimon said in May that he was unhappy with the way the Clarity Act was written, while Blockchain Association CEO Summer Mersinger says the stablecoin rewards issue could come back into focus when the bill returns to the House.

Utah Sen. John Curtis says he supports crypto but also values banks, and South Dakota Sen. Mike Rounds has pointed to his banking industry ties. That leaves the legislation at the center of a broader fight over how digital asset rules could reshape funding, lending and competition across the U.S. financial sector.

Our earlier report on the SEC’s upcoming crypto-rulemaking meeting explained how the agency could propose a tailored offering regime and an “investment contract” safe harbor to clarify when tokens may stop being treated as securities after networks become operational. We noted that with Senate action on the CLARITY Act pushed back, the SEC’s moves were emerging as a near-term regulatory catalyst for the sector while broader market-structure questions remain unresolved.

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