Crypto vs Banks: Stablecoin Rewards Spark Major U.S. Regulatory Clash

As U.S. lawmakers finalize a pivotal crypto market structure bill, a fierce lobbying battle has emerged—not between political parties, but between the crypto industry and powerful banking groups. At the center of the dispute is whether stablecoin users should be allowed to earn rewards, a feature that crypto firms argue is essential for innovation, while banks warn it threatens the traditional deposit-based financial system.

The latest draft of the Digital Asset Market Clarity Act, released by the Senate Banking Committee, reflects a partial win for bank lobbyists. While the crypto sector successfully secured many of its priorities, protections for stablecoin rewards have weakened. Under the proposed compromise, stablecoins cannot generate rewards simply by being held passively like a savings account, but rewards tied to transactions or activity would still be permitted.

Crypto advocates say this shift undermines the intent of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which became law last year. That legislation barred stablecoin issuers from paying yield directly but allowed platforms and third parties to offer rewards. Companies like Coinbase have relied on that distinction to share interest earned on stablecoin reserves, such as those backing USDC, with customers.

Banking groups, including the American Bankers Association and the Bank Policy Institute, argue these reward programs function as indirect interest payments that could drain deposits from banks and disrupt local lending. Crypto leaders counter that stablecoins are not deposits, do not rely on FDIC insurance, and do not fund bank lending activities.

Industry figures such as Blockchain Association CEO Summer Mersinger and Coinbase executives have accused large banks of using community banks as political cover to protect their dominance in payments. Coinbase CEO Brian Armstrong has even warned his company may withdraw support for legislation that bans stablecoin rewards.

Despite the controversy, some policy experts argue the impact may be limited, noting that common yield-generating activities like staking and lending remain allowed. With amendments still under consideration and parallel negotiations ongoing in other Senate committees, the final outcome remains uncertain. What is clear is that the fight over stablecoin regulation has become a defining test of power between crypto innovators and Wall Street incumbents in Washington.