Banking Groups Seek USDC Reward Ban in CLARITY Act
Seventy-seven US state banking associations, supported by the American Bankers Association and the Independent Community Bankers of America, have urged the Senate to amend the CLARITY Act. Their proposed changes would restrict stablecoin rewards linked to user balances or holding periods.
The coalition is seeking changes to Section 10404(c)(1) and the removal of Section 10404(3)(B). It argues that activity-based rewards can function like interest payments and could draw deposits away from community banks, potentially reducing funding for mortgages and small-business loans.
The proposals could affect Coinbase’s USDC rewards programme, although the letter does not name the exchange directly. If adopted, stablecoin issuers and platforms might lose a key incentive for users to hold USDC and other dollar-pegged tokens. The issue comes as the Senate prepares for a possible cloture vote on the CLARITY Act. A similar letter was sent in July by 76 state banking associations, indicating growing lobbying pressure.
Separately, Hashcats has reported a slowdown in NFT minting during its tenth epoch. The project recorded 4,566 recent mints against a 16,376-cat target, while 9,109 cats have been mined. Its token buyback model uses 30% of mint proceeds and 5% of swap fees to buy and burn HASH. About 1.8 million HASH, or 41.3% of total issuance, has been burned, with roughly 29 ETH awaiting deployment. Slower minting could weaken future buyback support for HASH.
Neutral
The immediate market impact is likely neutral because the proposed stablecoin reward restrictions are not yet law and would primarily affect specific yield or rewards products rather than stablecoin settlement activity. USDC could face targeted downside if traders expect Coinbase or other platforms to reduce rewards, potentially lowering demand for balance-based stablecoin holdings. However, the proposal does not challenge USDC’s dollar peg, reserves, or core payment use.
In the short term, regulatory headlines could increase volatility in USDC-related products and pressure crypto platforms exposed to stablecoin rewards. Traders may rotate toward non-yielding stablecoins, regulated money-market products, or assets less directly affected by the legislation. The Senate’s cloture timetable and any amendments will be important catalysts.
Over the longer term, restrictions could reduce stablecoin growth incentives in the US and strengthen the position of traditional bank deposits. Conversely, clearer rules could improve institutional confidence if the final legislation provides a workable framework. The lobbying campaign resembles previous US crypto policy disputes, where proposed restrictions initially caused sector-specific volatility but had limited effect on the wider market unless they threatened access to banking, liquidity, or stablecoin convertibility.
The separate HASH update is more directly negative for that small-cap project. Lower NFT minting reduces fee revenue available for token buybacks and burns, weakening its deflationary narrative. The 29 ETH buyback queue offers temporary support, but declining participation could become a persistent supply and liquidity risk. Overall, the combined news is neutral for the broader crypto market, with bearish risks concentrated in USDC reward products and HASH.