Citigroup Chief Executive Officer Jane Fraser is urging the Senate to pass the Clarity Act while pressing lawmakers to tighten rules around stablecoin rewards, a dispute that has become one of the bill’s most difficult unresolved issues.
Speaking on Fox Business on Thursday morning, Fraser said a procedural Senate vote is expected next month. She backed the legislation’s broader effort to establish rules for the U.S. cryptocurrency market, but warned that rewards paid to stablecoin holders could resemble bank deposit incentives if they are structured too broadly.
Her comments place one of Wall Street’s largest banks directly in a legislative fight over whether digital-dollar platforms should be able to offer returns to customers. The outcome could shape how stablecoins compete with checking accounts, savings products and other bank-funded sources of credit.
Banks focus on deposits and lending capacity
Fraser said Citigroup’s concern centers on the connection between deposits and lending. Banks use customer deposits as a major source of funding for mortgages, business loans and local credit lines. If customers move a meaningful share of readily available cash into stablecoins that offer recurring rewards, banks could face higher funding costs or reduce lending in areas where crypto services do not provide an alternative source of credit.
The concern is especially acute for smaller lenders, which generally depend more heavily on deposits than the largest U.S. banks. Community banks and regional institutions have argued during the stablecoin-policy debate that tokenized dollars offering yield-like benefits could draw money from local accounts without taking on the same obligations that banks face, including capital requirements, deposit insurance costs and lending commitments.
Stablecoins are tokens designed to maintain a fixed value, typically at $1, by holding cash, Treasury securities or similar reserve assets. The policy question is less about whether people can use stablecoins for payments than whether platforms can pay customers for simply retaining those tokens over time.
A reward paid for holding a stablecoin can make the asset function more like an interest-bearing cash product. Banks say that structure risks creating a regulatory imbalance, while crypto companies have argued that limits should not prevent payment platforms from offering incentives tied to actual usage.
Senate compromise draws line around passive rewards
A Senate compromise negotiated by Senator Angela Alsobrooks, a Maryland Democrat, and Senator Thom Tillis, a North Carolina Republican, would prohibit platforms from paying rewards solely because a customer holds a stablecoin. The proposed terms would allow rewards linked to transactions and payments.
That distinction seeks to preserve incentives for stablecoins to be used as a payment tool while limiting programs that resemble interest on a bank account. In practice, a customer might receive a benefit for spending, transferring or using stablecoins through a payment service, but not for leaving a balance untouched.
The approach addresses a central banking-industry objection without imposing a blanket ban on consumer rewards. It also leaves difficult questions about implementation, including how regulators would distinguish a transaction-linked program from a holding reward designed to achieve the same commercial result.
Fraser’s intervention suggests Citigroup wants that line to be clear enough to prevent platforms from repackaging passive yield through loyalty programs, transaction requirements or other structures. The concern is likely to remain active even if the Senate adopts compromise language, because the final bill would need to reconcile Senate provisions with legislation approved in the House.
House and Senate could face another round of talks
Summer Mersinger, Chief Executive Officer of the Blockchain Association, said the yield issue could return if the measure goes back to the House after Senate action. The House version of the Clarity Act did not contain language on stablecoin yield, leaving room for negotiations between the chambers.
That procedural path gives both banking and crypto groups another opportunity to influence the final text. Crypto firms are likely to argue that a narrow rewards restriction is necessary to keep the legislation focused on market structure and consumer protections rather than recreating bank-product rules. Banks will seek language that prevents payment platforms from using stablecoin incentives to compete directly for household balances.
The debate is also testing Republican alliances in the Senate. Politico reported that Senator John Curtis of Utah and Senator Mike Rounds of South Dakota are among Republican senators weighing competing relationships with banking and cryptocurrency interests. Their positions could matter in a closely divided chamber where a procedural vote may require broader support than a simple party-line measure.
Crypto industry faces a less certain timetable
The bill’s prospects have become less certain as the stablecoin-rewards debate has intensified. Galaxy Research put the probability of the Clarity Act becoming law this year at 30%, according to the material provided. That estimate reflects the challenge of moving a complex financial-services bill through the Senate while lawmakers are still negotiating a provision with direct consequences for banks, payment companies and crypto platforms.
JPMorgan Chase Chief Executive Officer Jamie Dimon has also criticized the bill’s drafting. During a May Fox Business interview, Dimon attacked Coinbase Chief Executive Officer Brian Armstrong while discussing the legislation, illustrating how the dispute has drawn unusually public friction between major banks and cryptocurrency companies.
The next Senate action will show whether lawmakers can preserve the bill’s momentum without leaving the stablecoin-rewards issue unresolved. A compromise that limits passive yield while allowing payment-related incentives could offer a route forward, but it would also place stablecoin providers under clearer limits as they seek a larger role in everyday payments.
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