Stablecoin

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<p>A new policy fight is taking shape in Washington.</p>
<p>More than 125 crypto and fintech organizations, <a href="https://theblockchainassociation.org/wp-content/uploads/securepdfs/2025/12/Letter-to-Senate-on-Stablecoin-Rewards.pdf" target="_blank" rel="noopener noreferrer nofollow">led by the Blockchain Association</a>, have urged the U.S. Senate Banking Committee to reject efforts that would expand restrictions on stablecoin rewards under the <a href="https://coinpedia.org/news/u-s-treasurys-genius-act-sets-stage-for-privacy-first-crypto-regulation-says-a16z/" target="_blank" rel="noopener noreferrer nofollow">GENIUS Act</a>. The group warns that broadening the rules would hurt consumers, slow innovation, and give traditional banks an unfair edge.</p>
<p>The letter was sent this week to Senate Banking Chairman Tim Scott and Ranking Member Elizabeth Warren, pushing back against proposals that seek to reinterpret the law’s ban on stablecoin <em>“interest or yield.”</em></p>
<h2 class="wp-block-heading" id="h-what-the-genius-act-allows-and-what-it-doesn-t">What the GENIUS Act Allows and What It Doesn’t</h2>
<p>The GENIUS Act clearly prohibits stablecoin issuers from paying interest to token holders. But according to the coalition, Congress intentionally allowed platforms and third parties to offer lawful rewards and incentives.</p>
<p><em>“That distinction was not accidental,” </em>the letter states, arguing that expanding the ban would <em>“reopen a settled issue”</em> and disrupt a carefully negotiated compromise.</p>
<p>Crypto groups say this is a fundamental change to how stablecoins can compete in payments.</p>
<h2 class="wp-block-heading" id="h-banks-warn-of-deposit-risk-crypto-pushes-back">Banks Warn of Deposit Risk – Crypto Pushes Back</h2>
<p>Banking groups have argued that stablecoin rewards could drain deposits from the banking system and hurt lending, especially at community banks. Some estimates have projected potential deposit outflows of up to <strong>$6.6 trillion</strong>.</p>
<p>The coalition disputes those claims, pointing to a <a href="https://www.crai.com/insights-events/publications/study-from-cra-about-impact-of-stablecoins-adoption-on-community-bank-deposits/" target="_blank" rel="noopener noreferrer nofollow">Charles River Associates study </a>that found no evidence of disproportionate deposit outflows from community banks between 2019 and 2025.</p>
<p>They also note that banks currently hold about <a href="https://www.federalreserve.gov/aboutthefed/files/the-fed-explained.pdf" target="_blank" rel="noopener noreferrer nofollow">$2.9 trillion in reserves</a> earning interest at the Federal Reserve, raising questions about whether deposit constraints are the real issue.</p>
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
 <p><em>“Opposition to stablecoin rewards reflects protection of incumbent revenue models, not safety-and-soundness concerns,”</em> the letter says.</p>
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<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter">
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  <blockquote class="twitter-tweet">
   <p>3/ Efforts to restrict stablecoin rewards in the midst of productive bipartisan collaboration on market structure legislation would reopen a settled compromise, inject uncertainty into regulatory implementation, and undermine confidence in newly enacted financial legislation.</p>— Blockchain Association (@BlockchainAssn) <a href="https://twitter.com/BlockchainAssn/status/2001744311608561776?ref_src=twsrc%5Etfw" rel="noopener noreferrer nofollow">December 18, 2025</a>
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<h2 class="wp-block-heading" id="why-stablecoin-rewards-matter-now">Why Stablecoin Rewards Matter Now</h2>
<p>With average checking account yields near 0.07% and savings accounts around 0.40%, the coalition argues that stablecoin rewards help platforms share value directly with users, especially in a higher-rate environment.</p>
<p>The group also warned that reopening the issue before <a href="https://coinpedia.org/news/analyst-says-genius-act-reshapes-u-s-debt-markets-critics-slam-overblown-claims/" target="_blank" rel="noopener noreferrer nofollow">GENIUS rules</a> are even written could undermine confidence in crypto regulation.</p>
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
 <p><em>“When Congress passes a bill, and it gets signed into law, if you can reopen it right away, you’ve got a question about how much certainty is that really bringing to the market,” </em>said Blockchain Association CEO Summer Mersinger.</p>
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<p>This is an important fight for the industry. Stay tuned to Coinpedia for what’s next.</p>
<h2 class="wp-block-heading" id="h-faqs">FAQs</h2>
<div class="schema-faq wp-block-yoast-faq-block">
 <div class="schema-faq-section" id="faq-question-1766223457986">
  <strong><strong>How could changes to stablecoin reward rules affect everyday users?</strong></strong>
  <p>If rewards offered by wallets or platforms are restricted, users could lose access to incentives that lower transaction costs or offset inflation. This may reduce the appeal of using stablecoins for payments or savings compared to both traditional banks and overseas crypto platforms.</p>
 </div>
 <div class="schema-faq-section" id="faq-question-1766223678343">
  <strong>What happens procedurally after this letter to the Senate Banking Committee?</strong>
  <p>Any reinterpretation or amendment would likely emerge through committee markups, regulatory guidance, or future rulemaking once the GENIUS Act is implemented. That process could take months and may involve input from regulators like the Treasury Department and Federal Reserve.</p>
 </div>
 <div class="schema-faq-section" id="faq-question-1766223737610">
  <strong><strong>Who stands to benefit or lose the most from a stricter interpretation of the GENIUS Act?</strong></strong>
  <p>Traditional banks could benefit from reduced competition for deposits, while crypto platforms and their users may face fewer choices and lower returns. The outcome also matters for regulators, as it sets a precedent for how flexible or rigid future digital asset laws will be enforced.</p>
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Are Banks Trying to Kill Stablecoin Rewards? 125 Crypto Groups Push Back

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