The US banking industry has been pushing to end the crypto industry’s market structure bill, the Digital Asset Market Clarity Act, due to a dispute over the appropriate role of stablecoin rewards. But lawmakers continue to negotiate a compromise to move this legislation forward.
One of the lawmakers at the center of those talks, Sen. Angela Alsobrooks, said Tuesday at an American Bankers Association summit in Washington that both sides of the negotiation — bankers trying to limit the most stable rewards as a threat to traditional deposits and the crypto industry that claims they are an important incentive for consumers — are going to be “just a little bit unhappy.” The Maryland Democrat worked with Sen. Thom Tillis, a North Carolina Republican, to find a way to get a long-delayed Senate Banking Committee hearing on the legislation.
“The compromise that me and Senator Tillis have been working on is one that we believe will allow us to put in place guardrails that will help us prevent – in every way possible – the deposit flight that we don’t want to see happening, and allow innovation to flourish at the same time,” Alsobrooks said, referring to banks’ insistence that rewards on stablecoin holdings are so similar to bank deposits that people will withdraw their money from banks.
“We absolutely must have these protections to prevent deposits from leaking, but we will probably have to make compromises,” the senator said.
The compromise so far appears to focus on whether a narrower area of stablecoin activity would be eligible for customer rewards paid by crypto platforms.
Last year’s stablecoin law, the Directing and Establishing Domestic Innovation for Stablecoins in the United States (GENIUS) Act, “prohibited payment stablecoin issuers from paying interest to attract customers,” noted ABA President Rob Nichols. He argued that “unless crypto exchanges and other affiliates are bound by the same common-sense restrictions, the result is a clear effort to evade Congressional intent.”
Sen. Mike Rounds, a South Dakota Republican who, like Alsobrooks and Tillis, is a member of the Senate Banking Committee, told Banks on Tuesday that he was “not yet sure” how to properly approach stablecoin rewards. He said awarding rewards to customers cannot depend on the amount of money held in an account, but can be linked to how active the account is.
“We try to reflect that in the discussions,” he said.
The bankers, who were preparing Tuesday to fan out to attend meetings on Capitol Hill to make their case to lawmakers and staff, pushed for a very limited allocation for the awards. But Jamie Dimon, CEO of JPMorgan Chase & Co. and leader of America’s largest institution, suggested in a recent interview that his industry could accept transaction-based rewards — a position that has been proposed by the crypto industry in meetings at the White House.
The US Office of the Comptroller of the Currency recently proposed a rule to adopt much of the GENIUS Act, although its stance on stablecoin rewards has been considered murky by the crypto industry. The agency had said it would not allow stablecoin issuers to evade the yield ban. But industry insiders expressed comfort in being able to implement rewards programs that don’t run counter to the OCC’s proposal, which digital asset advocates say leaves considerable room for rewards programs designed as incentives for customers.
Although bankers again this week highlighted the dangers of the yield gap on their business model, the legislation could still advance if Alsobrooks, Tillis and other members of the Senate Banking Committee are satisfied with the new compromise language. The next step would be an enhancement hearing, like the one delayed earlier this year. If the bill passes, it will be combined with a version already approved by the Senate Agriculture Committee.
A final version would then be put to the full Senate for a vote, requiring approval from a considerable number of Democrats.
This may remain a concern as other debates beyond stable coin yield remain unresolved. Senate Democrats have raised concerns that the decentralized finance (DeFi) industry presents vulnerabilities to bad actors, and they have also supported Democrats being appointed to vacant positions at the CFTC and SEC. But perhaps the most controversial of their demands is to ban top government officials from profiting from their personal crypto business ties – particularly President Donald Trump.
There are also procedural obstacles. Senate time is still precious, and other issues could still get in the way, like the war in Iran and Trump’s threats that he won’t sign any approved bill until Congress sends him a voter ID package he can sign before the midterm congressional elections.
Read more: Market Structure Review: State of Crypto
