Crypto and Banks Clash Again Over Senate Stablecoin Draft

Stablecoin rewards are at the centre of a renewed clash between banks and crypto over a Senate draft. Thom Tillis said he expects the draft text to be released this week after talks with Sen. Angela Alsobrooks. However, banking groups have already raised concerns about where the latest proposal draws the line.

The debate remains focused on a narrow yet far-reaching question: whether crypto exchanges and other intermediaries should be permitted to offer rewards tied to the use of stablecoins. That issue has held up Senate market structure talks for months, even after a White House meeting in February failed to close the gap between bank lobbyists and crypto trade groups.

The dispute is still about stablecoin rewards

The current Senate bill bars crypto firms from paying interest simply for holding a stablecoin, but it leaves room for rewards or incentives tied to certain activities, such as making a payment or joining a loyalty program. Banks say that this is a loophole that should be closed. Crypto firms argue that banning those incentives would make it harder to compete and attract users.

The argument has only grown sharper since more than 3,200 bankers urged the Senate in January to extend the GENIUS Act’s yield restrictions to exchanges, brokers, dealers and affiliates. In that letter, the American Bankers Association said stablecoin rewards could pull deposits away from local banks and leave less money available for mortgages, car loans, farm credit and small business lending.

The White House and banks are modelling different risks

The White House Council of Economic Advisers added to the fight on April 8, saying that eliminating stablecoin yield would raise bank lending by only $2.1 billion, or 0.02%, while imposing an estimated $800 million cost on users. The report also said community banks would account for about $500 million of the added lending under that baseline.

Banks pushed back almost immediately. In an April 13 response, ABA writers said the administration had studied the wrong question by looking at the effect of a ban in a stablecoin market of about $300 billion instead of asking what happens if yield-paying stablecoins grow to $1 trillion or $2 trillion and begin pulling funding out of community banks at scale.

The bill still has a narrow path forward

That leaves lawmakers trying to draft a middle ground that allows activity-based rewards while blocking passive yield on idle balances. For the crypto industry, the risk is that any deal lands too close to the banks’ position and removes one of the clearest consumer draws for dollar-backed tokens. For banks, the concern is that any carveout wide enough to satisfy exchanges could reopen the same deposit competition Congress tried to limit when it passed the GENIUS Act.