A six-figure anti-CLARITY Act ad buy is now underway from America's small banks. The battle for crypto regulation has shifted from Wall Street to rural America.

The ad begins simply with an American flag over my hometown in the Midwest. Father assists son on tractor An inline image of a street lined with trees where a couple is walking. The camera cuts to low-res video of suited "crypto insiders," then a voice chimes in: "American families don't want experiments with their money. They want jobs, they want growth; they want credit available. Communities suffer the consequences of crypto getting a free pass."

The Independent Community Bankers of America, which speaks for some 4,000 small community banks across the nation, literally just took the fight over the CLARITY Act to somewhere most crypto coverage will never go: to a local banker who knows every farmer in their county by first name.

What community banks really care about

ICBA's big worry is stablecoin rewards. As passed in the Senate, the CLARITY Act enables crypto platforms to pay users for use of stablecoins in transactions, payments and transfers. According to the banks, even activity-based rewards act like interest by another name and deposits will follow where consumers can earn meaningful yields holding digital dollars on a crypto platform rather than in a savings account.

Their projection is stark. According to the ICBA, the bill would lead to a $1.3 trillion moratorium on deposits in community banks and deprive them of $850 billion in loans that small businesses and farmers count on.

The ICBA's president, Rebeca Romero Rainey, was blunt about what is at stake. She added: "Community banks make over 60% of all small business loans and almost 80% of all agricultural loans in the United States." In many areas, they are that local economic driver because they take deposits in the community and reinvest them into loans which stimulates economic activity. What happens to the loans when the Clarity Act passes in its current form? And they'd probably disagree, but you know.

The banker already marked as a loss

Troy Richards, Guaranty Bank and Trust (banking)→ The $450 million-asset Guaranty operates nine branches in northeast Louisiana, and he has been working with the same farming communities for more than 40 years. In an interview with the Guardian, he stated that already this year $40,000 has left customer accounts and flowed into crypto.

"It is going to likely be the largest disruptor of community banking that we have ever witnessed," he said. He anticipates that outflow to accelerate dramatically if rewards, even activity-based ones, are permitted for stablecoin platforms.

It is not just a financial point that he makes in a somewhat larger sense. "These crypto issuers are not in our neighborhoods. They cannot sit across the desk from a farmer or small business owner and counsel with them. They don't back the town's local little league team. They don't purchase ads in the local high school yearbook. And they are not paying local taxes.

The counterargument

The banks are defending an outdated business model, not their clients, crypto advocates say. CEO of the Digital Chamber Cody Carbone was very blunt: "The ICBA's campaign is not about protecting Main Street. "It's to protect a model that nobody wants anymore from competition.

The crypto industry is also arguing that stablecoin reserves would remain at banks, meaning deposits wouldn't disappear completely. Community banks reply that those reserves will be siphoned off to JP Morgan and Citigroup, not a nine branch lender in rural Louisiana.

What this means for the CLARITY Act

The ICBA campaign isn't simply a lobbying effort. It is a political calculation. To get the CLARITY Act through the Senate, Republicans require 60 votes to do so; that means at least eight Democrats will need to cross over. Democrats have been pointing to the Trump family crypto holdings as justification for holding back. And now rural Republicans have another reason for caution, community bank lobbying.

May: The Senate Banking Committee cleared the bill. It has not hit the floor yet. As the August recess approaches rapidly, right in time for midterm campaign season, the ICBA is banking on a farmer from Montana and small business owner from Louisiana being more effective than any lobbyist in Washington.

Richards said: "The crypto industry has been fairly successful in communicating their message well. "It's our turn now."

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