Banks and Crypto Firms Clash Over Stablecoin Yields
A bipartisan proposal introduced by Thom Tillis and Angela Alsobrooks aims to restrict crypto firms from issuing rewards that are “economically or functionally equivalent” to interest-bearing bank deposits. The language is part of the proposed Clarity Act, which seeks to establish clearer rules for the digital asset industry.
The proposal reflects growing concern among lawmakers and banking groups that stablecoin products could begin competing directly with traditional bank deposits. As stablecoins continue to gain adoption, regulators and financial institutions are pushing for stronger oversight to prevent disruption within the banking system.
Banking Industry Pushes Back on Stablecoin Rewards
Major banking trade groups argue that the proposed legislation still leaves loopholes that crypto firms could exploit. Organizations including the American Bankers Association and the Bank Policy Institute warned that companies may still offer rewards through membership or loyalty programs, effectively bypassing the intended restrictions.
In a joint statement, the groups said the proposed language “falls short” of fully preventing yield-like incentives for passive stablecoin holders. They believe such practices could shift consumer funds away from traditional banks and into digital asset platforms.
The banking organizations also referenced research suggesting that widespread adoption of yield-bearing stablecoins could reduce lending activity for consumers, small businesses, and farmers by more than 20%. This potential reduction in available credit has become a key concern for the traditional financial sector.
Crypto Industry Defends Innovation and Customer Rewards
Supporters of the legislation argue that the compromise strikes a balance between innovation and financial stability. Senator Tillis stated that the proposal still allows crypto companies to provide other forms of customer rewards without directly offering bank-like interest payments.
Tillis emphasized that the broader goal is to move the Clarity Act forward on a bipartisan basis and provide long-awaited regulatory certainty for the cryptocurrency industry. According to him, clearer rules are essential for fostering innovation and maintaining U.S. competitiveness in digital finance.
Brian Armstrong quickly backed the proposed language and encouraged lawmakers to advance the bill. The crypto industry sees stablecoins as a major driver of future digital payments and decentralized finance growth.
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Regulators Prepare for Broader Stablecoin Oversight
Beyond Congress, federal regulators are also moving to shape stablecoin policy. The U.S. Treasury Department and the Commodity Futures Trading Commission are expected to issue rulemaking guidance defining which products qualify as yield-equivalent rewards under the proposed framework.
At the same time, the Office of the Comptroller of the Currency has proposed additional restrictions tied to the Genius Act. The proposal would prevent platforms from paying yield on stablecoins held in custody, though some third-party arrangements may still be reviewed on a case-by-case basis.
Tim Scott recently confirmed that the Senate Banking Committee is working toward a bipartisan markup of the legislation in May. As the debate intensifies, the outcome could shape the future relationship between traditional banking institutions and the rapidly evolving cryptocurrency sector.