Senator Thom Tillis has proposed new CLARITY Act language that would allow federal banking regulators to intervene if stablecoin yields trigger systemwide deposit flight from US banks.
Summary
- Thom Tillis proposes a CLARITY Act “circuit-breaker” to address stablecoin-related deposit flight.
- Banking groups continue pressing for stricter stablecoin rules despite an earlier compromise.
- Cynthia Lummis says the Senate expects to release the CLARITY Act text within days.
According to a report from Punchbowl, the North Carolina Republican has suggested adding a “circuit-breaker” provision to the Senate’s crypto market structure bill after concerns from banking groups continued to dominate negotiations over stablecoin rules.
The proposal would authorize regulators, including the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), to step in if they determine that stablecoin-related activity is causing deposits to leave the banking system at a broader level.
The latest proposal returns attention to one of the most contested sections of the CLARITY Act as lawmakers work toward releasing the Senate text before the chamber’s August recess.
It also comes after earlier negotiations led by Tillis and Senator Angela Alsobrooks produced a compromise allowing crypto firms to offer only activity-based rewards rather than unrestricted yield on stablecoins.
Banking groups continue pushing for tighter stablecoin language
Despite that compromise, banking organizations remain unconvinced that the latest draft adequately protects traditional deposits. As previously reported by crypto.news, several banking associations have argued that the bill’s current wording leaves room for stablecoin issuers to offer incentives that could encourage customers to move money away from bank accounts.
According to those banking groups, the language governing permissible rewards remains too vague and creates uncertainty over how regulators would interpret future stablecoin products. Community banks have been particularly vocal in warning that widespread migration of deposits into yield-bearing digital assets could reduce funding available for lending and other banking activities.
Tillis’ proposed circuit-breaker mechanism appears designed to address those concerns without completely prohibiting stablecoin rewards. Under the framework described by Punchbowl, regulators would receive authority to act only after identifying evidence of systemwide deposit flight rather than imposing an outright ban in advance.
The banking debate is unfolding alongside another dispute that continues to complicate Senate negotiations. Several Democratic lawmakers are pressing for ethics provisions tied to President Donald Trump’s crypto business interests before agreeing to move the legislation forward.
Earlier this week, Senator Elizabeth Warren urged colleagues to include ethics safeguards in the bill, a development that coincided with a decline in prediction market odds for the legislation’s passage.
Senate prepares to release legislative text
Fresh guidance on the bill’s timeline came during an interview on FOX Business, where Senator Cynthia Lummis said the Senate expects to introduce the CLARITY Act’s legislative text within the next few days.
Speaking during the interview, Lummis stated that the legislation is intended to strengthen consumer protections, help law enforcement combat illicit finance, and keep digital asset markets operating within the United States. She also reiterated that Senate leaders are working toward bringing the measure to the floor before lawmakers leave Washington for the August recess.
Her comments follow earlier reports indicating that Senate leadership is targeting a floor vote before the end of July if negotiations can be completed. Lummis noted, however, that the scheduling decision ultimately rests with Senate Majority Leader John Thune, who controls when legislation is brought before the full chamber.
While supporters continue to push for action before the recess begins, the final Senate text must still bridge disagreements over stablecoin regulation, banking safeguards and ethics provisions before it can secure the bipartisan backing needed to advance.
