The US banking industry had effectively pushed to halt the crypto industry’s market structure bill, the Digital Asset Market Clarity Act, over a dispute over the proper role of stablecoin rewards. But lawmakers continue to negotiate a compromise to advance that legislation.
One of the lawmakers at the center of those talks, Sen. Angela Alsobrooks, told an audience at an American Bankers Association summit in Washington on Tuesday that both sides of the negotiation — bankers trying to cap most stablecoin rewards as a threat to traditional deposits and the cryptocurrency industry arguing they are an important consumer incentive — are going to be “a little disgruntled.” The Maryland Democrat has been working with Sen. Thom Tillis, a North Carolina Republican, to find a way to get a long-delayed Senate Banking Committee hearing on the legislation.
“We believe that the compromise that Senator Tillis and I have been working on will allow us to have the guardrails that will help us prevent, in every way possible, the deposit flight that we don’t want to happen, and allow innovation to grow at the same time,” Alsobrooks said, referencing banks’ insistence that rewards for stablecoin holdings are so similar to bank deposits that people will take their money out of banks.
“It is absolutely necessary to have these protections to prevent the flight of deposits, but we will probably have to make some compromises,” the senator said.
So far, the compromise appears to focus on the possibility of a narrower area of stablecoin activity being eligible for customer rewards paid by crypto platforms.
Last year’s stablecoin law, the National Innovation Guidance and Establishment for US Stablecoins (GENIUS) Act, “prohibited issuers of payment stablecoins from paying interest to attract customers,” noted ABA President Rob Nichols. He argued that “unless crypto exchanges and other affiliated businesses are subject to the same common-sense restrictions, the result is a clear effort to evade Congress’ 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 is still “not sure” how to properly address stablecoin rewards. He said delivering rewards to customers cannot depend on how much money is in an account, but could be tied to how active the account is.
“We’re trying to reflect that in the discussions,” he said.
The bankers, who were preparing Tuesday to attend meetings across the Capitol to make their points to lawmakers and staff, have pushed for a very narrow allocation for the rewards. But JPMorgan Chase & Co. CEO Jamie Dimon, the leader of the largest U.S. institution, suggested in a recent interview that his industry could accept transaction-based rewards, a position the cryptocurrency industry has offered 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 the crypto industry found its position on stablecoin rewards murky. The agency had said it would not allow evasion of the yield ban for stablecoin issuers. But industry experts have expressed confidence that they will be able to establish rewards programs that will not conflict with the OCC proposal, which digital asset advocates say leaves considerable room for rewards programs designed as incentives for customers.
Even as bankers further underscored the dangers of the yield gap in their business model this week, the legislation could still advance if Alsobrooks, Tillis and others on the Senate Banking Committee are satisfied with the new compromise language. The next step would be a review hearing, like the one that was delayed earlier this year. If the bill passes, it would be combined with a version that already passed the Senate Agriculture Committee.
A final version would then be presented to the full Senate for a vote, the approval of which would require a significant number of Democrats.
This may remain a concern because other debates beyond the performance of stablecoins have not been resolved. Senate Democrats have expressed concerns that the decentralized finance (DeFi) sector poses vulnerabilities to bad actors, and have also argued for Democrats to be appointed to vacant positions at the CFTC and SEC. But arguably the most controversial of their requests is to ban top government officials from profiting from personal crypto trading ties, most notably President Donald Trump.
There are also procedural obstacles. Time in the Senate is always at a premium, and other issues could still get in the way, such as the war in Iran and Trump’s threats not to sign any passed bills until Congress sends him a voter ID package that he can sign into law before the midterm elections.
Read more: State of Market Structure: State of Cryptocurrencies
