Senator Thom Tillis said on Monday that he plans to release draft language later this week to help resolve a long-running dispute over stablecoin yield. This topic is one of the biggest issues delaying talks on crypto market structure in the Senate.
The North Carolina Republican stated that the proposal aims to address the conflict between banks and crypto firms. These groups have disagreed on whether exchanges should be allowed to reward users for holding stablecoins.
The dispute has become a major hurdle for the CLARITY Act, a broader crypto bill that has been stuck in the Senate Banking Committee since January. Under the GENIUS Act passed last year, stablecoin issuers are already banned from paying interest directly.
Tillis has been working with Sen. Angela Alsobrooks of Maryland and White House officials on compromise language that could move the bill closer to the next stage.
Alsobrooks said last month that she and Tillis had reached an “agreement in principle,” though the final wording still needed more work and industry review.
“I think the language has come together well,” Tillis said on Monday. “If things proceed the way they are now, we’ll probably release the text publicly later this week.”
The latest draft proposal was seen by industry representatives from both sides earlier this month. It has faced private pushback from banks, according to three people familiar with the discussions who wished to remain anonymous.
Banks and crypto firms are still split
Banks want stricter rules because they fear stablecoins with rewards could pull money out of normal savings accounts. That is important because banks use customer deposits to give loans.
In January, White House brought banking and crypto groups together to help solve the issue. By then, the fight over stablecoin rewards had already become one of the biggest reasons the bill was facing delays.
Crypto firms see it differently. They say rewards programs can help bring in users and increase competition in financial services. Tillis-Alsobrooks reportedly would mostly ban passive yield. That means users would not earn rewards just for holding stablecoins in their accounts.
However, the proposal may still allow activity-based rewards. These would be linked to payments, transactions, or other platform use. This approach looks like a middle path. It tries to address bank concerns while still leaving some room for crypto platforms to offer incentives.
The latest proposal is important because it may show whether the Senate is finally getting closer to solving one of the hardest disputes in crypto regulation.
Earlier this month, banking lobbyists got a private look at the draft, but many of them were not pleased. But so far, they haven’t said exactly what’s bothering them.
Still, if Tillis and Alsobrooks can get help from both banks and crypto companies, the Senate Banking Committee may finally be able to move forward after months of waiting.
That would not end the broader debate over the CLARITY Act. However, it could remove one of the biggest hurdles blocking progress.
White House dismisses stablecoin yield impact on banks
A White House research note published on 8 April added a new point to the debate.
It said that banning stablecoin yield would only slightly increase bank lending. In simple terms, that suggests such a ban may not bring a big economic benefit.
The American Bankers Association, or ABA, has rejected a White House report that said stablecoin yields are not a major threat to the U.S. banking system. The group said the report missed the main issue.
They said the real issue is not how much bank lending would rise if stablecoin yield is banned.
Instead, they believe the bigger concern is what happens to bank deposits if stablecoin yield is allowed. In their view, even if total deposits in the banking system do not change much, money could still move away from smaller community banks and toward larger banks.
Despite their criticism, ABA researchers admitted that households and businesses could still have a reason to move money into stablecoins that offer higher returns.
Coinbase CEO Brian Armstrong has also argued that stablecoin yield could put pressure on banks to compete more directly. He has said banks have paid very low interest on deposits for many years, while crypto products may offer users better returns.