The American Bankers Association is pulling out every lobbying tool in its arsenal ahead of the Senate Banking Committee markup of the Clarity Act on Thursday, May 14.

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Over the weekend, ABA president Rob Nichols emailed every member bank CEO, urging them to call their senators directly. The ask: strip out the language that allows crypto firms to offer interest-like rewards on payment stablecoins.

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To be sure, this looks like a regulatory fight on the surface, but in practice, it's a fight over where the next $1.7 trillion in U.S. deposits ends up.

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What the Numbers Actually Say

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The ABA's own April 13 study estimates that if yield-bearing stablecoins are allowed, the market could scale from roughly $300 billion today to as much as $2 trillion. The banking group says that growth would come largely at the expense of bank deposits — especially at community banks.

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The White House Council of Economic Advisers ran a competing analysis in April and reached the opposite conclusion: prohibiting stablecoin yield would only increase bank lending by roughly $1.2 to $2.1 billion, which is economically negligible.

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The ABA's pushback wasn't on the math. It was on the framing. Their argument: the CEA modeled a $300 billion market. The real question is what happens when that market grows 5–7x and yield becomes the migration mechanism.

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Worth noting: Treasury Secretary Scott Bessent has separately called the $2 trillion stablecoin market figure "very reasonable," and Treasury actively wants the market to grow, because dollar-pegged stablecoins help finance the deficit through Treasury bill demand.

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That tells you the banks aren't fighting crypto. They're fighting Treasury.

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Why Community Banks Are the Pressure Point

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The ABA's argument lands hardest at the local level. Even if total deposits in the banking system stay constant, a reshuffle away from community banks toward large institutions — or stablecoin reserve accounts — has real consequences.

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State-level modeling makes that concrete. One Iowa-focused projection estimated:

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  • $5.3 to $10.6 billion in deposit outflows
  • $4.4 to $8.7 billion drop in lending to households and businesses
  • Smaller banks forced to replace funding through higher-cost wholesale borrowing
  • Reserve deposits from major stablecoin issuers would largely flow to larger institutions, not community banks

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Indeed, the Federal Reserve's December 2025 study modeled a moderate scenario where stablecoin growth of just $500 billion could reduce U.S. lending capacity by up to $1.26 trillion.

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Make no mistake: this isn't an abstract policy debate. It's a structural funding question for U.S. credit creation.

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The Compromise on the Table — And Why It's Not Holding

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Lawmakers already hashed out a middle ground: prohibit yield that resembles deposit interest, but allow activity-based reward programs. Similar to credit-card points.

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The banks haven't accepted that. The crypto industry, which spent $131 million in the 2024 election cycle backing 274 pro-crypto House candidates, is fighting back hard. Senator Bernie Moreno called the ABA's effort the "banking cartel … in full panic mode." Senator Cynthia Lummis, who chairs the Banking Committee's digital assets subcommittee, posted that it's "now or never" for the bill.

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There's roughly 10 weeks of Senate floor time left before the midterm elections. If Clarity stalls again — as the GENIUS Act did over the same yield issue — it likely doesn't move in 2026.

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The Risk Side

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To be sure, the ABA's $2 trillion projection is advocacy modeling, not consensus economics. The CEA's general equilibrium analysis is a real counterweight. There's also the China angle. China's e-CNY now pays interest on verified wallets, and if the U.S. bans stablecoin yield while rival nations build interest-bearing digital dollars, dollar-denominated capital could flow offshore. Treasury knows this. The banks know Treasury knows this.

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Stablecoin yield is also not FDIC-insured. That's the consumer-protection argument the ABA leans on, and it's not wrong.

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The Takeaway

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It's not a crypto bill fight. It's a deposit-based fight, with Treasury, the Fed, and the banking lobby pulling in different directions inside the same administration.

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This is the kind of policy battle that quietly reprices regional and community bank equity if it goes against the ABA, and reprices stablecoin issuers and major crypto exchanges if it goes the other way. Either way, Thursday's markup is the date to watch.

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Whatever the committee reports out — or doesn't — will set the table for the next phase of this fight. The longer it drags, the harder it gets to move before the midterms.

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