Stablecoin Rewards Debate Heats Up Ahead of Crypto Bill Vote

The core of the banking industry’s opposition is a direct link between deposits and lending. The American Bankers Association’s council of community bankers articulated this concern in a letter to lawmakers, stating that “allowing inducements like interest or rewards on stablecoins could incentivize customers to move savings out of banks, jeopardizing the lending that fuels growth in towns across America.” This argument frames stablecoin rewards not merely as a competitive product feature but as a potential destabilizing force for the traditional banking model that supports Main Street economies. The pushback follows hundreds of community bank leaders urging Senate members to protect local lending from perceived stablecoin risks, setting up a classic clash between an entrenched financial system and an emerging digital alternative.

This tension highlights a fundamental regulatory question: should stablecoin holdings, which are designed to maintain a stable value, be treated like bank deposits for regulatory purposes? The banking industry’s stance suggests they believe it should, to prevent what they see as an unlevel playing field where crypto platforms can offer attractive yields without the same regulatory capital and lending obligations. The outcome of this debate will directly impact how companies like Coinbase, which currently offer such rewards under provisions from earlier legislation, can operate and attract customers in the future.

Crypto industry leaders have mounted a vigorous defense, framing the issue in terms of innovation, consumer choice, and national competitiveness. Coinbase Chief Policy Officer Faryar Shirzad argued on X that Congress had already settled the matter in previous legislation and that “reopening it now only creates uncertainty and risks the future of the U.S. Dollar as commerce moves on-chain.” He and others, including Ji Kim of the Crypto Council for Innovation, warn that restricting stablecoin rewards could drive consumer adoption offshore and cede leadership in digital currency innovation.

The argument takes on a distinctly geopolitical tone when contrasted with developments abroad. Shirzad specifically pointed to China’s plans to pay interest to users of its state-backed Digital Yuan, suggesting that U.S. restrictions would be a strategic misstep. “Stablecoin rewards facilitate customer acquisition, allow for customer loyalty, build merchant acceptance, and ensure continued U.S. leadership over stablecoin innovation,” added Ji Kim. This perspective positions the debate not as a narrow regulatory technicality but as a front in a broader contest for financial technological supremacy, with the dominance of the U.S. dollar potentially in the balance.

Caught between these powerful interests, lawmakers are working to craft a compromise. Cody Carbone, CEO of The Digital Chamber, a leading crypto trade association, told Decrypt he has received assurances from lawmakers that any new rules will create “parity” between the banking and crypto industries. “We’re at a point now where it has reached such a hot-button issue that it will be addressed in any text that goes forward,” Carbone said, though he noted it was “too early to say if it’s make-or-break.” This pursuit of parity suggests a regulatory framework that does not inherently favor one sector over the other, but the practical implementation remains the critical unknown.

The lobbying efforts are intensifying as the Thursday committee meeting approaches. The Digital Chamber plans to bring approximately 55 representatives from exchanges, token issuers, and DeFi protocols to Washington, D.C., to meet with more than 20 Senate offices. This push aims to demonstrate the industry’s unified desire to move legislation forward after previous deadlines in July, October, and December were missed. The broader bill itself seeks to establish clear jurisdictional boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) while setting registration rules for crypto exchanges and intermediaries, making the stablecoin rewards issue one of several complex components needing resolution.

As the Senate Banking Committee, under Chair Tim Scott, moves toward its key vote, the stablecoin rewards debate encapsulates the larger struggle to integrate a new financial paradigm with an old one. The final text of the market structure bill, expected to become clearer after Thursday’s deliberations, will reveal whether lawmakers can broker a truce that satisfies both the guardians of community banking and the architects of the on-chain economy, all while navigating the pressures of global financial competition.