The Honorable Charles Schumer
Majority Leader
United States Senate
322 Hart Senate Office Building
Washington, DC 20510
The Honorable Elizabeth Warren
Ranking Member
Senate Committee on Banking, Housing and Urban Affairs
United States Senate
311 Hart Senate Office Building
Washington, DC 20510
Re: NCRC’s Continued Opposition to Clarity Act, H.R. 3633
Dear Majority Leader Schumer and Ranking Member Warren:
The Senate is poised to vote whether to close debate on the Digital Asset Market Clarity Act (CLARITY) on September 15th. The National Community Reinvestment Coalition (NCRC) writes to urge you and your fellow Senators to vote no on this important procedural vote and, should it succeed, any subsequent substantive vote. Although there have been months of negotiations, the bill still has critical shortcomings. CLARITY creates significant risks to the stability of our financial system and low- and moderate-income households and communities. Specifically, CLARITY:
- Does not protect against movement of funds from deposits to crypto that will result in reductions in household, small-business, and community lending
- Lacks strong, enforceable ethics and conflicts-of-interest provisions
- Fails to safeguard against illicit finance, fraud, and consumer harm
- Contains unnecessary artificial intelligence waivers for finance companies that roll back consumer protections
NCRC is a coalition of 700+ grassroots organizations that create opportunities to build wealth in underserved communities through affordable housing development, small business support, and workforce training. We work with banking institutions and communities to advance the goals of the Community Reinvestment Act (CRA), which requires banks to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, and requires regulators to evaluate their record of doing so. CRA examinations consider banks’ lending, access to banking services and support for community development.
For the following reasons, we urge you to vote “no” on CLARITY:
- CLARITY’s yield prohibition does not go far enough
The GENIUS Act prohibits permitted payment stable coin issuers from paying “the holder of any payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention of such payment stablecoin.”[1] The prohibition in the GENIUS Act is limited to issuers, not other players in the stablecoin ecosystem, namely, cryptocurrency exchanges and wallets that pay yield or rewards to holders. CLARITY contains provisions regarding yield and rewards, but they are not adequate to address this loophole or the impact the allowance of crypto rewards and yield may ultimately have on low- and moderate-income communities.
CLARITY would prohibit digital asset service providers and affiliates from paying interest or yield to users “solely in connection with the holding of [] payment stablecoins” or “on a stablecoin balance in a manner that is economically or functionally equivalent to payment of interest or yield on an interest-bearing bank account.”[2] But, the exceptions swallow the rule. CLARITY would allow rewards or incentives based on bona fide activities or transactions, including, loyalty, promotional, subscription, or incentive programs, so long as the payments are not calculated or distributed like banks’ payment or distribution of interest or yield.[3] But, it also allows “rewards” to be calculated by reference to balance, duration, and tenure, or a combination of those amounts.[4] These are exact factors that are used to calculate yield and interest payments on bank account deposits. The narrow scope of the prohibition combined with the broad scope of the exemptions render the yield provision ineffectual. Without sharper distinctions, the promise of these rewards could accelerate the flight of capital out of banks into stablecoins and digital assets.
- CLARITY’s encouragement of deposit flight will result in the loss of capital for household, small-business and community lending
Bank deposits provide the capital for funding bank lending activities and community investment and development. If households and business move their capital from bank deposit accounts to digital assets based on promised rewards, it will reduce the pool of funds available to support household, small-business, and community lending. And digital asset providers would benefit from the inflows of capital without assuming bank-like responsibilities to meet the credit needs of their communities.
According to the Treasury Secretary Bessent, the stablecoin market is valued at $300 billion and “could grow tenfold by the end of the decade.”[5] The US Treasury’s Borrowing and Advisory Committee estimated that as much as $6.6 trillion in deposits could move from the traditional finance sector into the stablecoin market.[6] While the Independent Community Bankers of America estimates a potential loss of $1.3 trillion in deposits and $850 billion less in community bank lending activity.[7] According to the American Bankers Association, when community banks lose deposits, they must replace the funding, “often through higher-cost wholesale borrowing” and “the increased funding costs translate into less lending and higher borrowing costs for households and small businesses.”[8]
Banks operate within a broader public policy framework designed to ensure that federally supported financial institutions help meet household, small business, and community credit needs. CLARITY would allow stablecoin and crypto companies to increasingly compete with banks for customer funds while operating under a very different regulatory framework – one lacking any requirement to meet community needs. CLARITY imposes no requirement on crypto companies to do so and instead, encourages deposit flight that will result in the loss of capital for household, small business, and community lending.[9]
- CLARITY does not include effective conflicts of interest and ethics provisions
We urge you to reject CLARITY because the ethics provisions appear far too narrow to prevent conflicts of interest.[10] First, we note the coverage of the provisions of the current draft is limited to the government officials and spouses, not any other family members of the government officials. Ethical standards for federal employees often cover children, including adult children to avoid the appearance of a conflict of interest, even if no “direct” conflict of interest is present. Given that the president and his adult children, are heavily involved in the crypto industry, including with a company that promotes the president as a “founder emeritus,”[11] broader coverage is warranted.
Second, it is not clear that the restrictions on issuance and sponsorship address existing licensing, branding, royalty, and transaction-fee arrangements with crypto companies. For example, would they require President Trump to divest from such arrangements, or would he be able to continue to profit from them? If he were allowed to continue to materially benefit from crypto products and platforms – even if any profits were placed in a blind trust—his financial interests could potentially influence administration policy decisions.
In addition, the enforcement mechanisms for the provisions are weak. If passed, the provisions likely would not go into effect until late 2027 but would “sunset” in January 2029, with there being no way to address pre-sunset conduct after that date. That is too short a runway for any meaningful enforcement investigation. In addition, CLARITY would limit enforcement authority to the Department of Justice and impose relatively small civil penalties[12] – when billions of dollars are at stake, a $500,000 penalty could be considered merely the cost of doing business. The weakness of these enforcement provisions will not deter unethical conduct or conflicts of interest.
- Exemptions for DeFi platforms create loopholes for illicit finance and systemic risks
NCRC is concerned that CLARITY exempts DeFi protocols, including non-controlling developers and providers, from anti-money laundering laws and other requirements related to registration, know your customer, and sanctions-law.[13] Many DeFi platforms involve companies and people who design, market, and profit from the crypto products—through front-end websites and apps, governance control, token issuances, developer teams, or affiliated market-makers. The exemption includes “platforms set up by actors who do not like the public nature of most blockchains, such as mixers, tumblers, and cross chain tumblers.”[14] These exemptions will risk building a pathway for bad actors to move money, evade sanctions, and launder money while leaving regulators and law enforcement in the dark.[15] A market structure framework should not reward opacity and regulatory gamesmanship that let sophisticated firms operate without the basic obligations that apply everywhere else in finance.
- Regulatory exemptions for artificial intelligence will roll back consumer protections
Rather than create a regulatory framework outlining protections for consumers in the digital marketplace, CLARITY instead would create an avenue for providers of consumer financial products and services to operate in the absence of any regulatory oversight or necessary consumer protections. CLARITY would create “AI Innovation Labs” – a way for consumer finance companies to seek regulatory waivers to use artificial intelligence (AI) systems regarding financial products, services, and activities.[16]
Unregulated AI poses significant risks to investors, market integrity, and financial stability.[17] Implementation of these CLARITY AI waivers could protect financial institutions that irresponsibly use AI in a variety of contexts. For example, a company with a waiver to use AI in the credit underwriting and decision-making process would be free to amplify racial disparities in the approval, pricing, and terms of credit products like student loans, mortgages, and small business loans.[18] Or, they could use their AI waiver to avoid responsibility for their chatbot giving incomplete or misleading financial information[19] or their debt collector AI agent’s unlawful attempts to collect paid debts.[20]
This is a solution in search of a problem. The financial industry has already been deploying AI within the bounds of federal laws and regulations across its business lines; there is no need to create regulatory carve outs for companies to deploy AI systems that would otherwise violate federal laws and pose risks to consumers and the economy.
For the forgoing reasons, we strongly urge you to vote against the CLARITY Act.
Thank you for your consideration and if you have questions, please contact NCRC’s Policy Director Tara Flynn at tflynn@ncrc.org.
Sincerely,
Jesse Van Tol
President and CEO
National Community Reinvestment Coalition (NCRC)
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[1] GENIUS Act § 4(a)(11).
[2] CLARITY Act, H.R. 3633 § 10404(c)(1), current version under consideration (https://www.lummis.senate.gov/wp-content/uploads/Clarity-Act.pdf); see Bloomberg Government, BGOV Bill Analysis: Senate Amended 3633, Crypto Regulations (Sep. 4, 2026), www.bgov.com.
[3] H.R. 3633 § 10404(c)(2).
[4] H.R. 3633 § 10404(c)(3) (B).
[5] Remarks by Secretary of the Treasury Scott Bessent before the Treasury Market Conference (Nov. 12, 2025), https://home.treasury.gov/news/press-relases/sb0314.
[6] U.S. Dep’t of the Treasury, Treasury Borrowing Advisory Committee (Apr. 30, 2025), https://home.treasury.gov/system/files/221/TBACCharge2Q22025.pdf.
[7] Indep. Cmty. Bankers of Am., Local Lending is At Risk, https://www.icba.org/payment-stablecoins.
[8] Sayee Srinivasan and Yikai Wang, The CEA Studied the Wrong Question on Stablecoin ‘Yield’ and Community Banks, ABA Banking J. (Apr. 13, 2026), https://bankingjournal.aba.com.
[9] NCRC has long advocated for requiring crypto companies to reinvest a portion of their proceeds into community development projects in underserved communities. See Bakari Levy and Kevin Hill, The Need for Community Development Accountability for Stablecoin Issuers, NCRC (Jul. 14, 2025), https://ncrc.org.
[10] CLARITY Act, H.R. 3633 §§ 30101-30106; see also Bloomberg Government, BGOV Bill Analysis: Senate Amended 3633, Crypto Regulations (Sep. 4, 2026), www.bgov.com.
[11] Max Rego, What to Know about Trump’s Financial Disclosure, The Hill (Jul.1, 2026), https://thehill.com/homenews/administration/5949500-trump-financial-disclosure-crypto/.
[12] CLARITY Act, H.R. 3633 § 30101.
[13] CLARITY Act, H.R. 3633 § 10301 and § 10604.
[14] Letter from National Sheriff’s Association to Senate Majority Leader John Thune and Senate Minority Leader Charles Schumer dated July 31, 2026. The letter articulates NSA’s concerns with H.R. 3633; although the NSA has recently moved its stance to neutral, the issues raised in its letter about CLARITY have not been addressed.
[15] Jasper Goodman, Cops vs. Crypto Clash Looms in the Senate, Politico (Apr. 9, 2026), https://www.politico.com/news/2026/04/09/cops-vs-crypto-clash-looms-in-the-senate-00864498.
[16] CLARITY Act, H.R. 3633 § 10509.
[17] Fin. Stability Bd., The Financial Stability Implications of Artificial Intelligence, Nov. 14, 2024, https://www.fsb.org/uploads/P14112024.pdf.
[18] Donald E. Bowen III, et al., Measuring and Mitigating Racial Disparities in LLMs: Evidence from a Mortgage Underwriting Experiment (Apr. 30, 2024), https://ssrn.com/abstract=4812158.
[19] Consumer Financial Protection Bureau, Chatbots in Consumer Finance (June 6, 2023), https://www.consumerfinance.gov/data-research/research-reports/chatbots-in-consumer-finance/chatbots-inconsumer-finance/.
[20] See Cam Deal, Americans buried in debt are now being chased by AI collectors over bills already paid, Yahoo Finance (May 31, 2026), https://finance.yahoo.com/economy/policy/articles/americans-buried-debt-now-being-060000627.html.
