Bank Groups Say Senate Stablecoin Reward Compromise 'Falls Short'

Major U.S. banking trade groups said on May 4 that a proposed compromise on stablecoin rewards in crypto market structure legislation does not adequately address deposit protection concerns. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America released a joint statement responding to legislative language finalized by Senators Angela Alsobrooks (D-Md.) and Thom Tillis (R-N.C.).

Compromise Language Details

The compromise prohibits “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 pushing back on provisions that prohibit direct interest payments 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 trade groups identified 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 banking groups said they plan to share detailed suggestions for strengthening the language with lawmakers in the coming days and 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.”

Legislative Context and Additional Challenges

The stablecoin reward dispute has delayed broader crypto market structure legislation, which would regulate the industry at the federal level through dividing oversight between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The Senate Banking Committee had scheduled a hearing in July but canceled it when Coinbase withdrew support over stablecoin reward language. Coinbase later signed off on the latest version.

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.

Senator Tillis’s Response

Later on May 4, Senator Tillis said he and Senator Alsobrooks worked with all stakeholders, including the banking 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 stated the compromise provides 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 said.

Industry Position

Crypto firms counter that restricting rewards would hamper innovation, presenting an ongoing tension between regulatory protection of traditional banking deposits and industry advocacy for flexible incentive structures.