On Tuesday, Senate lawmakers in Washington released an updated crypto market structure draft that bars digital asset firms from paying interest or yield solely for holding payment stablecoins. The change responds to banking industry warnings that stablecoin yield could drain traditional bank deposits.
The draft, as stated, places the restriction in Section 404, titled “Preserving Rewards for Stablecoin Holders,” and says “a digital asset service provider may not pay any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding of a payment stablecoin.”
Lawmakers preserved broad carve-outs for activity-based rewards tied to transactions, transfers, conversions, remittances, settlement, loyalty programs, liquidity or collateral provision, and governance or staking. The bill also requires the SEC and CFTC to issue plain-English disclosure rules within 360 days, naming who pays rewards and stating payment stablecoins are neither investments nor FDIC-insured.
Banking groups lobbied for the provision and warned of deposit flight. The American Bankers Association’s Community Bankers Council said up to $6.6 trillion in deposits could be at risk.
Senators Jack Reed, Chris Van Hollen, and Tina Smith demanded a public hearing before Thursday’s markup, arguing members would have little time to review the text. (Ed. note: The senators said the committee and public would have under 48 hours to review the proposal.)
Kadan Stadelmann, CTO at Komodo Platform, said the draft favors banks and curbs stablecoins’ passive yield, calling it a competitive setback. Nic Puckrin warned, “Given how little time there is between these latest proposals and the planned hearing on Thursday, I’m not holding my breath for the bill to pass this month.”
