- Key insight: Draft legislative language circulating on Capitol Hill meant to break an impasse between crypto firms and banks on stablecoin yield contains a lengthy list of exemptions for crypto firms, which is unlikely to generate bank support.
- What's at stake: Bankers are worried that crypto firms can offer yield-like products without the oversight and disclosure requirements that come with being a bank.
- Forward look: The language has not been incorporated into any bill and could change as lawmakers continue hashing out details.
WASHINGTON — The new crypto market structure bill language circulating among stakeholders isn't winning over banks, due to its inclusion of loopholes for stablecoin and crypto companies to continue to offer yield-like products, four people briefed on the language said.
Bankers and crypto firms saw draft language earlier this week that had been developed over the prior weeks by Sens. Thom Tillis, R-N.C., and Angela Alsobrooks, D-Md., and the White House. That language was aimed at bridging banks' and crypto firms' concerns with rules around crypto companies' ability to offer subscriptions and monetary rewards for using or moving stablecoins.
The bill still doesn't define "staking," one of the people said, and doesn't close a loophole that banks fear will allow crypto firms to essentially offer yield on stablecoins. There are other concerns, as well, including the potential for crypto exchanges to offer subscription products that also offer yield, or that firms could bypass the prohibition on issuing yield-like products for simply holding stablecoins by setting up a computer programming mode to just move money back between two accounts electronically, one of the people said.
The language is still being drafted and could still change before lawmakers make the entire text public.
Over the last year, talks on a crypto market structure bill have been stalled in part because of the
The GENIUS Act, the stablecoin law passed last year, does restrict stablecoin issuers from offering yield, but bank lobbyists want the prohibition to be more explicit and to cover all parties involved in stablecoin issuance, including crypto exchanges. The market structure bill is their best opportunity to enshrine such a ban.
But bankers didn't get the wholesale prohibition on stablecoin issuers and any third-parties from offering yield-like products that they wanted, the people said, although there have been some changes that bankers have asked for. There are roughly five pages of exemptions that bankers worry will allow crypto firms to bypass the ban on offering yield.
On the other hand, certain parts of the crypto industry, notably Coinbase — which previously
Lawmakers last week tried to project confidence that a final deal that would satisfy both the crypto and the banking industry was close at hand, with Senate Banking Committee Chair Tim Scott, R-S.C., saying that
"This is about having both sides at the table, fighting over the differences, and at the same time having all players — the industry and the financial services, the banks — at the same table," Scott said at the Blockchain Summit in Washington last Tuesday. "And I believe that this week we will have the first proposal in my hands to take a look at, and if that actually happened before the end of this week — and I think that it will — we'll at least know what the sketch looks like in person. If that's the case, I think we're gonna be in much better shape."
Sen. Cynthia Lummis, R-Wyo., one of the most pro-crypto lawmakers in Congress, however,
"I know that we have to get the banks to swallow hard and accept something less than perfect," Lummis said.
