The Digital Chamber, a leading cryptocurrency advocacy group, has urged the US Congress to preserve yield-generating capabilities for payment stablecoins.

In its latest proposal, the group argued that current legislative drafts in the CLARITY Act threaten to outlaw the fundamental mechanics of DeFi.

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Digital Chamber Urges Congress to Preserve Stablecoin Yields

The group specifically petitioned lawmakers to retain the exemptions in Section 404 of the proposed CLARITY Act.

These provisions distinguish between traditional “interest,” which banks pay on insured deposits, and other interest rates. They effectively separate this income from “rewards” derived from liquidity provision (LP) activities on decentralized exchanges.

The Chamber warned that removing these exemptions would not only stifle domestic innovation but also “undermine dollar dominance.”

The group posits that if US-regulated stablecoins are legally barred from participating in DeFi markets, global capital will inevitably flow to foreign-issued digital assets or unregulated offshore entities.

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This shift, they argue, would effectively reduce demand for the US dollar in the digital economy.

Furthermore, the advocacy group stressed that a total ban on yields would force users into passive holding strategies.

According to them, this could, ironically, increase financial exposure to “impermanent loss.” This is a risk associated with asset volatility in liquidity pools.

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Digital Chamber Offers Regulatory Concessions

Notably, the banking lobby contends that allowing stablecoins to offer yield without complying with banking capital requirements creates a dangerous arbitrage opportunity.

They argue that this regulatory gap threatens to destabilize the entire financial system. They also claimed that high-yield stablecoins would siphon liquidity away from community banks.

As a proposed compromise, the Chamber suggested mandating clear consumer disclosures to clarify that stablecoin yields are not comparable to bank interest rates and are not FDIC-insured.

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Additionally, they recommended that regulators conduct a federal “Deposit Impact” study two years after the bill becomes law.

The group argues that this empirical data will prove that stablecoins complement, rather than disrupt, the traditional banking sector.

The recommendations arrive as negotiations on a comprehensive market-structure bill (CLARITY Act) reach a critical impasse.

A high-stakes meeting at the White House earlier this week between banking representatives and cryptocurrency executives reportedly ended in deadlock.

Wall Street lobbyists remain staunchly opposed to any measure that would allow non-bank stablecoin issuers to pass yields to customers, viewing such products as a direct threat to the traditional depository model.