The White House reportedly took the lead during the latest Crypto Council meeting, narrowing the stablecoin rewards dispute that has delayed progress in the long-awaited crypto market structure bill.
White House Steps In On CLARITY Act Dispute
On Thursday, the White House held another meeting between the crypto industry and the banking sector to negotiate the stablecoin yield dispute that has stalled the crypto market structure bill, known as the CLARITY Act, over the past month.
According to a report from journalist Eleanor Terret, the meeting was smaller than previous ones, with only a few representatives from each side. From the crypto sector, participants included representatives from Coinbase, Ripple, a16z, the Blockchain Association, and Crypto Council for Innovation (CCI).
Meanwhile, no individual bank representatives attended; bank voices were represented through trade associations, such as the American Bankers Association, the Banking Policy Institute (BPI), and the Independent Community Bankers of America (ICBA).
Terret sources affirmed that there was a notable difference in yesterday’s meeting as the White House “took the lead in driving the discussion, rather than letting crypto firms and bank trades steer the discussion, as in prior meetings.”
For context, banks have heavily criticized the landmark stablecoin legislation, the GENIUS Act, due to “loopholes” that could pose risks to the financial system. The framework prohibits interest payments on the holding or use of payment-purpose stablecoins, but it only addresses issuers.
The banking side argues that allowing issuers and platforms to offer interest payments on stablecoins could distort market dynamics and affect credit creation in the country, hurting small- and medium-sized financial institutions in the sector.
To address these concerns, banking associations across the US urged senators to include language in the CLARITY Act that also bans digital asset exchanges, brokers, dealers, and related entities from offering yield on stablecoins.
The Senate Banking Committee’s draft proposed that issuers offer rewards for specific actions, such as account openings and cashback. However, it also prohibited issuers from providing interest payments to passive token holders.
The crypto side criticized the proposed measures, with some industry leaders publicly opposing the draft and withdrawing their support. As a result, a markup session on the Senate Banking Committee’s portion of the bill has been delayed.
Stablecoin Yield Out Of The Picture
At the Thursday meeting, Patrick Witt, executive director of the US President’s Council of Advisors on Digital Assets, reportedly brought a draft text that served as the anchor for the discussion. Sources in the room told Terret that the draft’s language acknowledged banks’ concerns raised in last week’s “Yield and Interest Prohibitions Principles” document.
Based on this, “earning yield on idle balances (…) is effectively off the table,” the journalist affirmed. The draft also clarified that any future restrictions on rewards would be narrow in scope. Therefore, the debate has now narrowed to whether crypto firms can offer rewards linked to specific activities.
An attendee from the crypto industry side reportedly said that banks’ concerns “appear to stem more from competitive pressures than from deposit flight.” Meanwhile, someone from the banking industry told Terret that they are still pushing to include a study examining the growth of payment stablecoins and their potential impact on bank deposits in the draft.
They also noted that the White House proposed anti-evasion language. The measure would give the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of the Treasury authority to enforce a ban on paying yield on idle stablecoin balances, and penalties of up to $500,000 per violation, per day, against companies that breach the ban.
Now, the banking industry representatives “will brief their members on today’s discussions and gauge whether there’s room to compromise on allowing crypto firms to offer stablecoin rewards,” Terret noted, adding that some attendees believe an end-of-month deadline isn’t unrealistic as talks are set to continue in the coming days.
The total crypto market capitalization sits at $2.28 trillion on the one-week chart. Source: TOTAL on TradingView
Featured Image from Unsplash.com, Chart from TradingView.com
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