America's Credit Unions and the ABA are warning that stablecoin yields could drain $6.6 trillion in deposits from local lenders. A joint letter to the Senate urges closing a loophole in H.R. 3633.
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America's Credit Unions, the American Bankers Association, and a coalition of community financial institutions sent a joint letter to the US Senate this week demanding that lawmakers close a loophole in proposed digital asset legislation that could allow payment stablecoins to offer yields. The letter, dated January 12-13, 2026, warns that if stablecoins start paying interest-like rewards, the resulting deposit flight could cripple local lending across the country.
The coalition cites Treasury estimates suggesting as much as $6.6 trillion in deposits could be at risk. That represents a large share of the capital that credit unions and community banks rely on to fund home loans, small business credit, and other local financial services.
The target of the group's criticism is the Digital Asset Market Clarity Act, designated H.R. 3633. The bill is meant to provide regulatory structure for digital assets. The coalition sees a dangerous gap: the legislation could permit stablecoin issuers to offer yields, rewards, or other interest-like inducements to holders of payment stablecoins.
The GENIUS Act, enacted in July 2025, already prohibits stablecoins from being treated as deposits and restricts their issuance by insured credit unions or banks. The coalition argues those protections don't go far enough. A separate legislative vehicle could open the door to yield payments through the back entrance.
Credit unions and community banks operate on a different model than larger institutions. They depend heavily on local deposits to fund local loans. Large banks have diversified funding sources, access to wholesale markets, and balance sheets that can absorb some deposit outflows. Community institutions don't have that cushion. A meaningful shift of deposits into stablecoins could hit them disproportionately hard. Home loan availability and small business credit in rural and underserved areas could suffer, the coalition said.
If Congress closes this loophole, it would effectively cap the utility of payment stablecoins. They would remain useful for transactions and settlements without being able to compete with traditional savings products by offering yield.
The Senate is currently considering broader legislation for digital asset market structure. The coalition's letter essentially asks lawmakers to amend H.R. 3633 before it moves forward. That means this debate could shape the entire regulatory framework for how stablecoins operate in the US for years, according to the group.
For stablecoin issuers like Circle and Tether, the outcome of this legislative fight will directly shape their product roadmaps. Circle has been positioning USDC as a compliant, US-friendly stablecoin. A ban on yield payments would constrain its ability to differentiate from competitors while potentially reinforcing its role as a pure payments instrument rather than a savings vehicle.
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