Jane Fraser, the CEO of Citigroup, has voiced her support for the CLARITY Act while also pushing for changes to its stablecoin reward regulations, which continue to be a primary concern for the banking sector as a Senate procedural vote approaches next month.
Summary
- Jane Fraser supports implementing the CLARITY Act but seeks amendments to its stablecoin reward provisions.
- She cautioned that stablecoin rewards might divert deposits from banks, impacting their ability to provide loans.
- The Senate’s compromise would prohibit rewards for merely holding stablecoins but allow incentives related to payments and transactions.
- The ongoing debate over stablecoin yields remains a significant issue for both banks and crypto firms ahead of the Senate vote.
In a Thursday interview with Fox Business, Fraser articulated Citigroup’s desire for legislators to refine certain elements of the bill. However, she still endorses the passage of a strong version of the legislation, as she believes it would improve the financial system.
“We have not abandoned our push for enhancements, but we are eager to see a solid bill passed,” Fraser stated. “I see it as beneficial for the system.”
Her support positions Citigroup as less adversarial compared to some larger banks, although Fraser acknowledges their shared concerns regarding whether crypto platforms should be allowed to offer rewards linked to stablecoins.
Citigroup CEO warns of potential impacts of stablecoin rewards on bank deposits
Fraser’s main concern centers on how stablecoin rewards may influence bank deposits in the U.S., particularly for institutions that rely on these funds for lending in underserved communities.
“Introducing a reward system on deposits could negatively impact their deposits and subsequently their ability to lend and provide credit in regions where cryptocurrency may not reach, and frankly, where larger banks are also absent,” Fraser pointed out. “This is a major worry for me.”
Banking associations have expressed similar concerns during negotiations regarding the CLARITY Act. In July, the American Bankers Association, Independent Community Bankers of America, and 76 state banking groups called on Senate leaders to strengthen Section 404 before the bill’s review.
As reported by crypto.news in July, these associations warned that ambiguous reward clauses might prompt customers to shift funds from traditional banking to payment stablecoins, thereby reducing the deposits available for community bank lenders.
The controversy partially stems from the design of stablecoin rewards. The GENIUS Act, enacted in 2025, forbids payment stablecoin issuers from directly offering interest or yield to holders. However, crypto exchanges and other service providers have implemented reward programs that effectively benefit users through arrangements not directly arranged by the stablecoin issuer.
Banking organizations argue that customers may see little difference between interest accrued from a bank and rewards received for holding stablecoins on a crypto platform.
CLARITY Act compromise allows for activity-based rewards
Senators Thom Tillis, R-N.C., and Angela Alsobrooks, D-Md., have sought to mitigate the contention by introducing compromise language that differentiates between passive yield and rewards associated with actual platform participation.
The proposed framework prohibits platforms from granting rewards solely for holding stablecoins while still permitting certain incentives linked to transactions, payments, and other qualifying activities.
This compromise language was shared with crypto and banking representatives earlier this year following a preliminary agreement reached by Tillis and Alsobrooks in March. The draft disallowed passive yield while allowing activity-based rewards connected to payments, transfers, or usage of the platform.
A revised 309-page version released by the Senate Banking Committee in May maintained this structural approach, permitting rewards based on activity while banning passive yield for merely holding the asset.
This language developed after ongoing disputes between banks and crypto firms over whether third-party rewards could undermine existing restrictions on stablecoin issuers.
Banking groups expressed dissatisfaction following the emergence of the compromise. In May, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America indicated that the revised provisions still did not sufficiently protect deposits.
These organizations contended that incentives determined by aspects such as balances or holding duration could mimic deposit interest, even when referred to as rewards.
In contrast, crypto firms argue that placing restrictions beyond passive interest would obstruct platforms from rewarding customers for legitimate actions.
Faryar Shirzad, Chief Policy Officer at Coinbase, commented during the May negotiations that banks had secured stricter restrictions while the compromise facilitated rewards tied to the active use of crypto platforms and networks.
Rift over stablecoin yields creates divisions between banks and crypto firms
This discord has become one of the most persistent issues surrounding the CLARITY Act, with banking organizations raising alarms over potential deposit withdrawals, while crypto firms fight to retain rewards that do not constitute passive interest.
Earlier in the year, banking groups ramped up their lobbying as lawmakers moved the legislation forward for Senate consideration. An American Bankers Association campaign sent thousands of messages to Senate offices advocating amendments to the stablecoin regulations.
Bank of America CEO Brian Moynihan previously projected that up to $6 trillion could potentially shift from bank deposits to stablecoins under a regulatory environment that allows the tokens to compete more directly for consumer funds.
The banking sector’s concerns extend to the ramifications for lending associated with such outflows. Banks utilize deposits as a funding source for mortgages, business loans, and various forms of credit, while stablecoin reserves are generally maintained in cash, short-term U.S. Treasuries, and other liquid assets.
Representatives from the crypto industry contest the risk level. In April, the White House Council of Economic Advisers countered the deposit concern, estimating that banning stablecoin yield could increase traditional bank lending by about $2.1 billion or approximately 0.02% of total loans.
The council anticipated that 76% of the additional lending associated with a yield ban would benefit larger banks, challenging the assertion that restrictions were primarily necessary to protect smaller community institutions.
Brian Armstrong, CEO of Coinbase, also argued that banks are attempting to limit the competition posed by stablecoins. During negotiations, he accused larger banks of seeking to prevent consumers from enjoying returns generated from stablecoin reserve assets.
Under the 2025 GENIUS Act framework, issuers must hold qualifying reserves for payment stablecoins and are not allowed to directly pay interest to holders. Platforms like Coinbase have enabled rewards through separate schemes, making the treatment of third-party incentives a key topic in the CLARITY Act debates.
Jamie Dimon has taken a tougher stance on the CLARITY Act
Jamie Dimon, the CEO of JPMorgan Chase, has adopted a more confrontational stance against the current legislation.
In a Fox Business interview in May, Dimon expressed that banks would oppose the CLARITY Act, believing its stablecoin provisions enabled crypto firms to provide interest-like returns without equivalent protections for banks. He indicated that the banking sector would continue to resist the bill, even if it ultimately failed.
Dimon also criticized Armstrong’s lobbying efforts during the interview, labeling the Coinbase CEO as “full of sh–” after the host referenced Armstrong’s claim to represent the crypto industry’s interests.
Fraser’s comments position Citigroup in favor of advancing the bill while advocating for changes to the very issue that has been a major source of opposition from the banking sector.
The next procedural review is anticipated when lawmakers return from the Senate’s August recess. Senate Majority Leader John Thune has set a cloture vote for September 15, postponing the initial vote to September after prior delays.
