Banking Groups Say Senate Stablecoin Compromise 'Falls Short'

Major U.S. banking trade groups said on Monday that a proposed legislative fix to stablecoin rewards “falls short” of their policy goals, according to a statement released by the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America. The statement came days after Senators Angela Alsobrooks (D-Md.) and Thom Tillis (R-N.C.) finalized a compromise to end months-long disputes involving the White House, banking lobby, and crypto industry over how to regulate stablecoin incentives.

The 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.” However, the prohibition does not extend to “activity-based or transaction-based rewards and incentives” tied to bona fide activities.

“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 bank trade groups said. “It is imperative that Congress get this right.”

Banking Industry Concerns

Banking groups have spent the past year opposing provisions in stablecoin legislation 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.

The bank trade groups raised 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.”

The groups said they plan to share “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.”

Broader Legislative Context

The stablecoin rewards dispute is part of a larger crypto market structure bill that would regulate the industry on the federal level, mainly through divvying up 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.

The issue has faced repeated setbacks as lawmakers attempt to advance the broader 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 when major crypto exchange Coinbase pulled its support, in part because of stablecoin reward language. However, the exchange signed off on the latest version.

Senator Response

On May 4, Sen. Tillis responded to the banking groups’ criticism, saying 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 noted 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 added.

Crypto firms have countered that restricting rewards would hamper innovation.