South Dakota’s Farm Economy Can’t Afford a Crypto Shortcut
by Nathan Franzén, SD Bankers Association
South Dakota agriculture operates months ahead of its income.
Long before a crop is harvested or cattle are sold, producers are paying for seed, fertilizer, fuel, feed, repairs, veterinary care, land rent and equipment. The bills arrive on schedule. Farm income does not.
That is why the operating line from a local bank matter so much. It allows a producer to put a crop in the ground, keep livestock fed and make it through the months between spending money and earning it back.
That relationship becomes even more important when the year does not go according to plan. Drought can reduce pasture and hay. A spring storm can damage crops or livestock. Input costs can jump without warning, and commodity prices can move in the wrong direction after most of the money has already been spent.
When that happens, our local bankers who know the operation and understand agriculture can make all the difference.
That is why a debate over cryptocurrency legislation in Washington should matter to farmers and ranchers across South Dakota.
The CLARITY Act is intended to establish clearer rules for digital assets. That is a reasonable goal. But the current legislation leaves a gap that could affect the deposits held by community banks in rural states like South Dakota.
Under the proposed approach, crypto platforms and related companies could offer interest-like payments to customers who keep stablecoins on their platforms. In practical terms, those companies would be competing with bank deposits without following the same rules or carrying the same responsibility to lend money back into local communities.
That may sound like a technical financial-policy dispute. It is not.
Deposits are the foundation of community-bank lending. The money deposited by families and businesses in a South Dakota town is put to work through operating loans, equipment financing, livestock loans, mortgages and credit for local businesses.
When those deposits leave the community bank, the bank has less affordable funding available to lend locally. It may have to replace those deposits with more expensive money, tighten lending standards, or charge borrowers more.
For a family farm, a beginning producer, or a small rural business, that can be the difference between moving forward and putting an investment off for another year.
A higher rate on an operating line means less money for seed, feed, machinery or employees. Tighter terms can make it harder for a young producer to buy land or for an established operation to recover from a difficult season. Less flexibility can be especially damaging in agriculture, where weather and markets rarely cooperate with a fixed repayment schedule.
The effects would not stop at the farm gate. Agriculture supports equipment dealers, cooperatives, feed stores, livestock markets, processors, truckers and other businesses throughout South Dakota. When farm credit becomes tighter or more expensive, the entire rural economy feels it.
None of this requires Congress to choose between agriculture and innovation. South Dakota producers use sophisticated technology every day. Rural America is not afraid of new ideas.
But innovation should compete on fair terms. A crypto platform should not be allowed to function like a bank account when attracting customers and then avoid the responsibilities that come with being a bank.
The solution is narrow and straightforward. Congress should close the carve-out and make clear that issuers, exchanges, affiliates and other third parties cannot pay people simply for holding stablecoins. Lawmakers can support legitimate digital payments without creating an incentive for deposits to leave the institutions that finance farms and rural communities.
Senator Mike Rounds and Senator John Thune are in unique positions to help make that happen.
As SD Bankers, we are grateful for the continued support both Senators have given to real problems faced by our Community Banks and SD Ag producers.
As the Senate considers the CLARITY Act, this language needs to be fixed before the bill advances. South Dakota’s farmers, ranchers, and rural businesses should not bear higher borrowing costs so large crypto companies, with tons of money, can unfairly expand a profitable business model.
Agriculture already comes with enough uncertainty. Washington should not add another risk by weakening the local lending system producers depend on.
South Dakota’s farm economy runs on credit, and that credit starts with deposits kept close to home.