- Key insight: Sen. Cynthia Lummis, R-Wyo., said the stablecoin yield dispute between the crypto and banking industries has been the central obstacle to a crypto market structure bill, and that banks may need to accept a compromise short of the comprehensive ban that they seek.
- Forward look: Lummis predicted the yield resolution will turn on barring platforms from using terms like "yield" or "APR" but stopping short of prohibiting any form of stablecoin rewards of any kind.
- What's at stake: Lummis accused a small group of large banks of driving opposition through community bank lobbying groups, while simultaneously building out their own proprietary digital asset products behind the scenes.
WASHINGTON — Sen. Cynthia Lummis, R-Wyo., said that the banking industry's opposition to stablecoin yield rules has been the biggest obstacle to passing a crypto bill, and that the banking industry may ultimately need to accept a less-than-ideal outcome.
"I know that we have to get the banks to swallow hard and accept something less than perfect," Lummis said at the DC Blockchain Summit in Washington on Wednesday.
Lummis is one of the leading lawmakers on crypto issues and an outspoken booster of the crypto industry. Negotiations around a long-simmering crypto market structure bill have been waylaid in recent months by a disagreement between the crypto and banking lobbies over whether crypto companies — including exchanges — should be permitted to offer yield-like rewards to stablecoin holders. Banks have argued such arrangements could siphon deposits away from banks.
Lummis said Wednesday that a resolution is within reach, though she acknowledged she had not yet seen the final legislative text. Her expectation is that the compromise will turn on terminology rather than an outright ban, saying that platforms would be barred from using language that frames stablecoin rewards as banking products, including things like "yield," "APR" or any comparison between stablecoin rewards and interest paid on deposits.
Sen. Tim Scott, R-S.C., the chairman of the Senate Banking Committee, said the day prior that compromise language between the stablecoin and bank industry could
"You don't use terms like yield, you don't pay something like yield on a balance that's sitting there, and you don't use terms like APR to describe this — anything that sounds like banking product terminology will not appear with regard to stablecoin rewards," Lummis said. "Rewards will essentially not be something that is tied to a balance."
Lummis offered sharp criticism of the banking industry, saying that she believes that banks have driven opposition to an otherwise workable bill.
"Brian Armstrong and Coinbase have found ways to be more flexible on this than the banks have," she said. "Gosh, the banks got really dug in on this for reasons that still escape me."
On both stablecoin rewards and master accounts, Lummis said that community bank groups — which have strong allies in Congress — have been driven to oppose the market structure bill by larger banks.
"My gut feel is the banks, especially the community banks that have been so effective in lobbying, are not going to be affected by this," Lummis said. "Those of us who grow businesses, me included, go to community banks to borrow money, and the banks, the five that I really think are behind all of this, are sort of exhorting their community bank colleagues to oppose this. At the same time, the big banks behind the scenes are building their own proprietary products and their own proprietary back-office functions so they can roll out competition for the existing business digital assets."
