Update for XRP Holders: Lummis States What Will Happen If CLARITY Act Is Killed

Concerns about stablecoins taking deposits away from community banks have become part of the debate surrounding the CLARITY Act.

U.S. Senator Cynthia Lummis has rejected that concern, citing banking data that she says shows deposits continue to grow across the U.S. banking system. She also pointed to the decline in community banks as evidence that consolidation, rather than stablecoins, remains the larger issue facing smaller institutions.

Lummis Points to Deposit Growth

Lummis said that some community banks have suggested that stablecoins are driving deposit flight. She challenged that claim by citing data from Bank of America and the Federal Deposit Insurance Corporation.

According to Lummis’s X post, Bank of America data shows household deposits increased across income groups this year. She also cited FDIC data showing that domestic deposits have grown for seven consecutive quarters.

Community banks, she added, have performed better than the wider banking industry on deposits, recording 5% growth. Lummis used those figures to question whether stablecoins are responsible for significant deposit losses at smaller banks.

Her post also addressed concerns surrounding the CLARITY Act compromise. Lummis said Section 404 would prohibit stablecoin issuers from offering payments that function as interest, including rewards or points that operate similarly. The provision would also prevent issuers from marketing stablecoins as deposits or claiming that they receive FDIC insurance.

Lummis described those requirements as stricter than current law rather than more permissive.

Community Bank Consolidation Takes Center Stage

Lummis then shifted the focus toward the decline in the number of community banks. She said approximately 2,000 community banks have disappeared over the past decade, while only 62 new community banks formed during that period.

According to her post, the institutions acquiring community banks are primarily super-regional banks rather than crypto companies. She therefore linked the decline of smaller banks to industry consolidation rather than stablecoin activity.

Lummis also noted that the Senate Banking Committee has already included a nine-provision community bank package in the housing bill. She said the package is designed to support deposit retention while the CLARITY Act would impose additional restrictions on stablecoin yield practices.

Community Bank Concerns Draw Different Responses

The comments under the post offered different perspectives on the relationship between traditional banking and crypto.

Lummis’ post ultimately presents the CLARITY Act as part of an effort to establish stricter stablecoin rules while addressing challenges facing community banks. Her central claim is that deposit growth and bank consolidation data do not support the idea that stablecoins are the primary cause of community bank decline.