Tensions are rising between U.S. banks and pro-cryptocurrency forces over stablecoin earnings provisions ahead of the Senate Banking Committee’s review of the CLARITY bill.

On May 11, blockchain media outlet BeInCrypto reported that Republican Senator Bernie Moreno said the U.S. banking industry has launched an all-out lobbying effort to block the stablecoin earnings provisions, calling it a "state of panic."

Moreno, a member of the Senate Banking Committee, said the American Bankers Association (ABA) asked bank chief executives to immediately move to pressure senators ahead of the scheduled review on May 14. He also said he would vote in favor to break the cartel.

At the center of the dispute is the scope of earnings that stablecoin issuers or platforms could provide to users. Rob Nichols, CEO of the American Bankers Association, urged immediate action on stablecoin earnings policy in a letter sent to bank CEOs on May 10. He said the currently proposed language could encourage deposit outflows into payment stablecoins and could create risks to growth and financial stability.

The American Bankers Association says the committee draft includes what it calls a "stablecoin loophole." The letter also said committee members do not sufficiently recognize the risks the loophole could pose to the economy. Banks are concerned that if stablecoins effectively provide returns similar to deposits, the existing deposit base could be weakened.

Moreno countered that the issue had already been addressed in earlier legislative discussions. He said the matter was reviewed during deliberations on the GENIUS bill led by Senator Bill Hagerty.

In the same vein, Patrick Witt, who serves on the President’s digital assets advisory council, also publicly criticized the banking industry. He said the White House held a meeting in February to discuss stablecoin rewards and earnings, but Nichols and other banking trade group CEOs refused to attend.

A compromise to be taken up by the Senate Banking Committee includes language mediated by Senators Thom Tillis and Angela Alsobrooks. It would ban providing returns that are "economically or functionally equivalent" to deposit interest. It is designed, however, to allow legitimate rewards that arise from actual platform activity. The issue is not whether to fully allow stablecoin earnings, but how far to restrict interest-like rewards that could function as a substitute for bank deposits.

Markets are also focused on the bill’s prospects. Participants in the prediction market Polymarket currently put the chance of enactment this year at 73 percent. If it passes committee review, it would move to a Senate floor vote. If it stops at the review stage, broader U.S. cryptocurrency legislation could be delayed during the current session.

The dispute is drawing attention because it suggests a conflict of interest within the U.S. financial sector over stablecoin regulation has moved into a phase ahead of a Senate vote. Banks cite deposit outflows and financial stability, while backers of the bill say a compromise that distinguishes platform rewards from deposit interest has already been prepared. The outcome of the committee review on May 14 is expected to be a turning point not only for the next step in U.S. stablecoin legislation but also for the pace of cryptocurrency-related bills.

The banking cartel is in full panic mode. While Americans were celebrating Mother’s Day with their families, the CEO of the American Bankers Association sent a frantic alert to every bank CEO in the country, demanding “immediate engagement” to lobby Senators and kill… pic.twitter.com/Phd6HsdBXR