Crypto Firms Offer Banks Stablecoin Reserve Sharing to Save Market Bill

According to a Bloomberg report, crypto firms have spent weeks negotiating with doubtful banks, with stablecoins emerging as the central point of disagreement. The industry’s latest proposals, as cited in the report, focus on giving community banks a larger, more integral role in the burgeoning stablecoin ecosystem. One key idea would mandate that issuers of dollar-pegged digital assets hold a portion of their underlying reserves at these smaller financial institutions. A separate recommendation aims to make it easier for the banks themselves to issue their own stablecoins.

This outreach is directly tied to the fate of the crypto market structure bill, which passed the House of Representatives last year but has since stalled in the Senate. The legislation’s progress has been hamstrung by unresolved tensions between the crypto and traditional finance sectors. By offering community banks a direct stake in the stablecoin economy through reserve holdings and issuance rights, crypto advocates hope to build crucial support and get the bill moving again.

The driving force behind the banks’ skepticism is a profound fear of deposit flight. A separate analysis from Geoff Kendrick warned that the growth of stablecoins could lead to the exit of as much as $500 billion in bank deposits across industrialized nations by the end of 2028. This concern is not abstract; the digital dollar market is experiencing notable growth, with the total stablecoin supply in circulation having risen by roughly 40% over the past year.

Traditional financial institutions argue that crypto platforms compound this threat when they pay users rewards, or yield, for holding stablecoins. They contend these payouts could actively pull customers away from traditional checking and savings accounts, threatening a major source of low-cost funding for banks. It remains unclear whether the proposal to park reserves at community banks adequately addresses this core anxiety about customers moving their primary deposits out of the banking system.

The industry itself is not unified on the path forward. A major point of contention is precisely the issue of rewards, with some crypto companies, like Coinbase, supporting the ability to pay users for holding stablecoins. This internal divide mirrors the external stalemate. In an attempt to break the impasse, the Trump administration recently convened a meeting at the White House between crypto and banking trade groups. The talks, however, ended without an agreement on these core issues.

Despite the friction, the ongoing dialogue is viewed as a positive sign that the market-structure bill remains alive. Optimism for a compromise was voiced by Tim Scott, the chairman of the Senate Banking Committee, in a recent Fox News interview. “We can protect consumers and community banks while still allowing innovation and competition to lower prices and expand access,” Senator Scott said. “Both sides are working toward a compromise that keeps innovation here in America.” His statement underscores the high-stakes balancing act Congress faces: fostering financial innovation while safeguarding the stability of the traditional banking system and its depositors.