Stop Crypto Carve-Out That Could Raise Farm Costs

It’s frustrating: Washington has a habit of tucking its most expensive favors inside its most technical bills.

The CLARITY Act, a piece of crypto market-structure legislation now sitting in the Senate, is the latest example. Most of it is the sort of rulemaking that puts C-SPAN viewers to sleep. One of its provisions on stablecoin, buried in fine print, would quietly raise the cost of credit for every farmer in America. That is not what the bill’s backers advertise, of course.

A corn or cattle operation spends heavily in the spring and gets paid months later—if the weather and the markets cooperate. In between, families borrow from the community bank down the road to cover seed, fuel, equipment, and feed. That loan is the difference between being able to plant and having to sit out a season. The price of the loan is set by something most people never think about: the deposits sitting in local banks.

Community banks make roughly 80 percent of the nation’s farm loans and hold about two-thirds of rural deposits. They can lend only what their neighbors put in. When money leaves those banks, the credit available from those banks dries up.

That brings us to the loophole. As written, the CLARITY Act lets crypto exchanges and their affiliates pay customers “interest” for parking stablecoins with them, calculated on how much the customer holds and how long the customer holds it. As such, it competes with a bank deposit, and it pulls money out of the places that can least afford to lose it.

The people who wrote this provision know what they are doing. Coinbase alone booked around $1.35 billion in stablecoin-linked revenue last year, and the carve-out protects that business model. The price for protecting it is paid by a farm town in South Dakota or Texas, where the local bank suddenly has less to lend and the next operating note costs more.

One set of estimates puts $1.3 trillion in deposits and $850 billion in lending capacity at risk if the gap stays open. Even a fraction of that would ripple through rural America for years.

This isn’t a war on crypto, on innovation, or on anybody building something new. Payment stablecoins can coexist with a healthy banking system, and plenty of them will. The problem is narrow and specific: Paying people to sit on a balance is the economic twin of deposit interest, and it shouldn’t get a special exemption from the rules that protect depositors and the communities their banks serve. Close the loophole, and everyone competes on the same field. That isn’t protectionism. It’s common sense.

The bottom line: A digital token pretending to be a checking account shouldn’t get to skip the rules that banks live by.

The fix is not difficult. The Senate should prohibit interest or yield paid simply for holding stablecoin and apply that rule to issuers, exchanges, affiliates, and every other middleman so it can’t be gamed. That requires a few sentences of drafting, not a rewrite of the bill.

What farm country is asking of the Senate is simple: Give farmers a fair deal. Don’t advance the CLARITY Act until the stablecoin interest loophole is closed and agricultural lending is protected.

It would be foolish to jeopardize the wellbeing of the people who grow our food.