Banks and Crypto Backers Clash Over Digital Asset Regulation as Senators Introduce Landmark Legislation

Digital Asset Bill Stirs Controversy Over Stablecoin Yield

A key Senate panel began considering a landmark digital asset bill as banking groups floated last-minute changes to a compromise on stablecoin yield. The proposed changes aim to tweak the compromise brokered by Senators Thom Tillis and Angela Alsobrooks on stablecoin rewards earlier this month. The goal is to move forward legislation long sought by the crypto industry, which seeks to create clear rules for the digital asset space.

The banking advocacy groups, including the American Banking Association and the Consumer Bankers Association, released text on Friday that would completely limit stablecoin issuers from providing any rewards on the asset. This is a shift from the terms of the compromise, which allowed companies to provide rewards when a customer actively uses stablecoin. The crypto lobby had originally hoped that they could pass on rewards to customers for keeping stablecoin in an account.

A letter accompanying the proposed text, written by a group of six bank lobbying groups, stated that the language proposed by the senators "includes exceptions that will enable evasion of the intended prohibition and incentive customers to hold and grow stablecoin balances at the expense of deposits." The crypto industry originally hoped to pass the legislation last summer, with President Donald Trump's blessing, but faced hurdles from the bank lobby.

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Crypto advocates were quick to jump on the banking group's proposed language, calling the industry "anti-competitive." Yield on stablecoins has been one of the major sticking points in the negotiations to finally pass legislation that would create clear regulation for digital assets.

Paul Grewal, chief legal officer for Coinbase, wrote on X that the proposed language is not a "narrow fix" and instead designed by the banking lobby for "killing competition." "For months, their target was yields 'equivalent' to interest-bearing bank accounts. Now it's transaction-based rewards, loyalty incentives, and other consumer benefits tied to blockchains," Grewal wrote. "Enough already."

A spokesperson for Alsobrooks referred Bloomberg to a statement from both senators earlier in the week, saying that they disagree with the position of the bank lobby on the proposed yield language in the bill. Tillis's office and Senate Banking Chairman Tim Scott's office did not respond to requests for comment.

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"Our compromise also allows crypto companies to offer other forms of customer rewards," Alsobrooks and Tillis wrote in the statement. "Most importantly, it helps put us on a bipartisan path to pass the CLARITY Act, providing the regulatory certainty needed to foster innovation. Some in the banking industry may not want either of these things to happen, and we respectfully agree to disagree."

The Senate Banking Committee's decision to schedule a markup for next week suggests there is some fresh momentum. The proposed changes to the compromise have reignited tensions between the crypto industry and the banking lobby, with both sides vying for control over the digital asset space.