Citigroup CEO Jane Fraser has backed passage of the CLARITY Act while continuing to push for changes to its stablecoin reward rules, keeping the banking industry’s main concern with the crypto bill alive ahead of a Senate procedural vote expected next month.
Summary
- Citigroup CEO Jane Fraser supports passing the CLARITY Act but wants changes to its stablecoin reward rules.
- Fraser warned that stablecoin rewards could pull deposits from banks and reduce their ability to provide credit.
- A Senate compromise would ban rewards for simply holding stablecoins while allowing incentives tied to payments and transactions.
- The stablecoin yield dispute remains a key issue between banks and crypto firms ahead of the Senate vote.
Fraser told Fox Business on Thursday that Citigroup still wants lawmakers to improve parts of the legislation, but she supports getting a workable version through Congress because she believes the bill would benefit the financial system.
“So, we have not given up on pushing to get some improvements made to the bill, but we would like to see a good bill go through,” Fraser said. “I think it would be excellent for the system.”
Her support puts Citigroup in a less confrontational position than some other large banks, even as Fraser shares their concern over whether crypto platforms should be allowed to offer rewards tied to stablecoins.
Citigroup CEO says stablecoin rewards could affect bank deposits
Fraser’s main concern centers on the effect that stablecoin rewards could have on deposits held by U.S. banks, particularly institutions that rely on those funds to finance lending in communities with fewer credit options.
“If you are having a reward system on deposits, it could have a detrimental impact on their deposits, and therefore their ability to provide lending and access to credit in parts of the U.S. that crypto won’t reach, and frankly, the large banks don’t reach,” Fraser said. “So, I am worried about it from that perspective.”
Banking groups have made a similar argument during negotiations over the CLARITY Act. In July, the American Bankers Association, Independent Community Bankers of America and 76 state banking associations asked Senate leaders to tighten Section 404 before the legislation reached the floor.
As crypto.news reported in July, the groups warned that unclear reward provisions could encourage customers to move money from traditional bank accounts into payment stablecoins, reducing the deposits available to community lenders.
The dispute stems partly from the way stablecoin rewards are structured. The GENIUS Act, passed in 2025, prevents payment stablecoin issuers from directly paying interest or yield to holders. Crypto exchanges and other service providers, however, have used rewards programs that can pass benefits to users through arrangements not directly offered by the stablecoin issuer.
Banking groups have argued that customers may see little practical difference between interest paid by a bank and rewards received for keeping stablecoins on a crypto platform.
CLARITY Act compromise allows activity-based rewards
Senators Thom Tillis, R-N.C., and Angela Alsobrooks, D-Md., have tried to address the dispute through compromise language that separates passive yield from rewards linked to actual platform activity.
The proposal bars platforms from paying rewards simply because a customer holds a stablecoin. It still permits certain incentives connected with transactions, payments and other qualifying activities.
The compromise language circulated among crypto and banking representatives earlier this year after Tillis and Alsobrooks reached an agreement in principle in March. The draft prohibited passive yield while retaining activity-based rewards tied to payments, transfers or platform use.
A revised 309-page version released by the Senate Banking Committee in May retained that basic structure, allowing activity-based stablecoin rewards while prohibiting passive yield for simply holding the asset.
Lawmakers developed the language after months of disagreement between banks and crypto companies over whether third-party rewards would undermine the restrictions already placed on stablecoin issuers.
Banking groups remained dissatisfied after the compromise emerged. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America said in May that the revised provisions still did not adequately protect deposits.
The groups argued that incentives calculated using factors such as balances or holding periods could function much like deposit interest even if they were formally presented as rewards.
Crypto companies have taken the opposite position, arguing that restrictions extending beyond passive interest would prevent platforms from rewarding customers for legitimate activity.
Coinbase Chief Policy Officer Faryar Shirzad said during the May negotiations that banks had secured tighter restrictions while the compromise preserved rewards tied to actual use of crypto platforms and networks.
Stablecoin yield fight has divided banks and crypto firms
The dispute has become one of the most persistent issues surrounding the CLARITY Act, with banking organizations warning about deposit losses while crypto firms have pushed to preserve rewards that do not amount to passive interest.
Earlier this year, banking groups stepped up their lobbying as lawmakers prepared the legislation for Senate consideration. An American Bankers Association campaign sent thousands of messages to Senate offices as the industry sought changes to the stablecoin provisions.
Bank of America CEO Brian Moynihan has previously estimated that as much as $6 trillion could eventually move from bank deposits into stablecoins under a regulatory structure that lets the tokens compete more directly for customer cash.
The banking industry’s concerns extend to the lending consequences of such an outflow. Banks use deposits as a source of funding for mortgages, business loans and other credit, while stablecoin reserves are commonly held in cash, short-term U.S. Treasuries and similar liquid assets.
Crypto industry representatives dispute the scale of the risk. The White House Council of Economic Advisers challenged the deposit argument in April, estimating that prohibiting stablecoin yield would increase traditional bank lending by about $2.1 billion, or roughly 0.02% of total loans.
The council estimated that 76% of the additional lending associated with a yield ban would flow through large banks, undercutting claims that restrictions were primarily needed to protect smaller community institutions.
Coinbase CEO Brian Armstrong has also argued that banks are seeking to limit competition from stablecoins. During the negotiations, he accused large banks of trying to prevent consumers from receiving returns generated by stablecoin reserve assets.
Under the 2025 GENIUS Act framework, issuers must maintain qualifying reserves for payment stablecoins and cannot directly pay holders interest. Platforms such as Coinbase have offered rewards through separate programs, making the treatment of third-party incentives a central issue in the CLARITY Act talks.
Jamie Dimon has taken a harder position on the CLARITY Act
JPMorgan Chase CEO Jamie Dimon has gone further than Fraser in opposing the legislation as currently written.
During a Fox Business interview in May, Dimon said banks would fight the CLARITY Act because he believed its stablecoin provisions allowed crypto firms to provide interest-like returns without protections comparable to those imposed on banks. He said the industry would continue opposing the legislation even if it ultimately lost the vote.
Dimon also criticized Armstrong’s lobbying campaign during the interview, calling the Coinbase CEO “full of sh–” after the host referred to Armstrong’s claim that he represented the crypto industry’s position.
Fraser’s comments leave Citigroup supporting passage while seeking changes to the same issue that has driven much of the banking industry’s opposition.
The next procedural test is expected after lawmakers return from the Senate’s August recess. Senate Majority Leader John Thune has scheduled a cloture vote for Sept. 15, moving the initial vote into September after earlier delays.
