Five major U.S. banking trade groups said on Monday that a proposed legislative fix to stablecoin rewards in Senate crypto market structure legislation "falls short" of adequately protecting bank deposits, according to a joint statement. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America released the statement in response to a compromise reached by Senators Angela Alsobrooks (D-Md.) and Thom Tillis (R-N.C.) on stablecoin yield provisions.
The Proposed Compromise Language
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." The prohibition does not extend to "activity-based or transaction-based rewards and incentives" tied to bona fide activities.
Senator Tillis defended the compromise in a post on X (formerly Twitter), stating: "The result is a substantially improved, consensus-based product. Our compromise prohibits stablecoin rewards from resembling interest on bank deposits, our core concern over deposit flight." He added that the compromise creates a bipartisan path forward to pass broader crypto market structure legislation.
Banking Groups' Concerns
The banking trade groups said the proposed language does not adequately achieve its stated policy goal. "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," the groups stated. "It is imperative that Congress get this right."
The groups identified specific concerns with how exchanges could offer interest through membership organizations and allowing rewards to be calculated by "reference to duration, balance and tenure." According to the statement: "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."
Banking groups have spent the past year pushing back on stablecoin provisions that prohibit issuers from paying interest directly but leave room for platforms like Coinbase to offer rewards. They argue such incentives could pull deposits away from traditional banks, particularly community institutions. Crypto firms counter that restricting rewards would hamper innovation.
Legislative Timeline and Broader Bill
The compromise comes after months of dispute involving the White House, the banking lobby, and the crypto industry. The Senate Banking Committee had scheduled a hearing in July, but canceled it when major crypto exchange Coinbase pulled its support, partly because of stablecoin reward language. However, Coinbase signed off on the latest version.
The broader crypto market structure bill would regulate the industry at the federal level, mainly by dividing oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission. 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.
Next Steps
The bank 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.
Senator Tillis acknowledged disagreement within the banking industry, stating: "Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree."
