Banking Groups Say Senate Stablecoin Compromise 'Falls Short'

Major banking trade groups said a proposed Senate compromise on stablecoin rewards does not adequately address their concerns about deposit protection. On Monday, the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America released a statement responding to legislative language finalized by Sens. Angela Alsobrooks (D-Md.) and Thom Tillis (R-N.C.).

Proposed Stablecoin Reward Restrictions

The latest legislative language blocks “covered parties” from paying any form of interest or yield to U.S. customers solely for holding stablecoins, or in any manner “economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” However, the prohibition does not extend to “activity-based or transaction-based rewards and incentives” tied to bona fide activities.

The banking trade groups stated: “Senators Tillis and Alsobrooks are seeking to achieve the correct policy goal — prohibiting the payment of yield and interest on stablecoins; however, the proposed language falls short of that goal. It is imperative that Congress get this right.”

Banking Industry Concerns

Banking groups have spent the past year opposing provisions that leave room for platforms like Coinbase to offer rewards. They argue such incentives could pull deposits away from traditional banks, particularly community institutions. The groups raised specific concerns about how exchanges could offer interest through membership organizations and allow rewards to be calculated by “reference to duration, balance and tenure.”

According to the banking groups: “Overtly incentivizing the idle holding of payment stablecoins for extended periods of time, and for specific balances, would negate the goals of the upfront prohibition (to deter deposit flight) while tying rewards directly to how much/long customers hold payment stablecoins in wallets or exchanges.”

The banking trade groups said they plan to continue working with lawmakers. “We will be sharing our detailed suggestions for strengthening the proposed language with lawmakers in the coming days, and we will continue to work in good faith to help Congress embrace innovation while protecting the deposits that drive local lending and economic activity in their community,” they said.

Legislative History and Industry Response

The stablecoin reward issue has faced repeated setbacks as lawmakers attempt to advance broader crypto market structure legislation following the House’s passage of the Clarity Act last year. The Senate Banking Committee had scheduled a hearing in July but canceled it at the 11th hour when Coinbase pulled its support, in part because of stablecoin reward language. However, the exchange signed off on the latest version.

Crypto firms counter that restricting rewards would hamper innovation. A larger crypto bill would regulate the industry on a federal level, mainly through divvying up oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Additional Legislative Challenges

The bill still faces additional challenges, including how to address crypto-related conflicts of interest tied to President Donald Trump and concerns around illicit finance, all amid limited Senate floor time.

Senator Tillis Response

Later on Monday, Sen. Tillis said he and Sen. Alsobrooks worked with all stakeholders, including the bank industry, for months. “The result is a substantially improved, consensus-based product,” Tillis said in a post on X. “Our compromise prohibits stablecoin rewards from resembling interest on bank deposits, our core concern over deposit flight.”

Tillis added that the compromise gets the ball rolling on a bipartisan path forward to pass crypto market structure legislation. “Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree,” he said.