Blockchain Association Pushes Back: Rejects Proposal To Widen Stablecoin Yield Restrictions

The crypto industry's main lobby just drew a line in the sand. The Blockchain Association has formally rejected a regulatory proposal seeking to clamp down on stablecoin yields, arguing it would stifle innovation and push activity offshore.

Why the pushback matters

Stablecoins—digital tokens pegged to assets like the US dollar—form the backbone of decentralized finance. They're the settlement layer for billions in daily trades and the primary source of liquidity. Restricting how they can generate yield doesn't just limit returns; it threatens the entire plumbing of the crypto economy.

The innovation argument

Proponents of the restrictions often cite consumer protection—a noble goal, sure. But the Association counters that overly broad rules would kill legitimate financial products before they're even born. We'd miss out on the next wave of automated market makers, lending protocols, and yield-bearing instruments that make DeFi more efficient than traditional finance. You know, the system where your savings account earns less than inflation.

Looking ahead

This isn't the last word. Regulators are watching, and the debate over how to govern this $150 billion-plus market is just heating up. The Association's rejection signals a readiness to fight for a framework that allows crypto-native innovation to thrive—not just survive. Because sometimes, the best consumer protection is a competitive market that actually works for them.

Preserving Platforms’ Ability To Offer Rewards

The coalition’s argument rests on the text of the GENIUS Act, which was signed into law earlier this year by US President Donald TRUMP and explicitly bars permitted stablecoin issuers from paying interest or yield directly to holders.

Reports have disclosed that the statute nevertheless leaves room for third-party platforms to provide incentives, a distinction industry groups say is intentional and important for competition.

Banks Call For Closing A Loophole

Banking groups have pushed back hard. A coalition led by the American Bankers Association and other banking trade groups asked Congress to clarify that the prohibition should extend to partners and affiliates, arguing that third-party rewards could circumvent the law and drain deposits from traditional banks.

According to recent coverage, Treasury analyses cited by bank advocates estimate that stablecoins could, in some scenarios, pull over $6 trillion from bank deposits — a figure that has become central to the banks’ case for tightening the rules.

Industry spokespeople say expanding the ban would chill new services that rely on stablecoins and would tilt the market toward larger, incumbent financial firms that already control many payment rails.

Based on reports, the Blockchain Association and partner groups contend that changing the law’s interpretation now would reopen negotiations the GENIUS Act resolved and would sow regulatory confusion before agencies finish writing implementing rules.

Supporters of stronger limits say the aim is consumer protection — to stop stablecoin arrangements from becoming de-facto interest accounts that could undermine the banking system and reduce loans to households and businesses.

Other observers point out the issue could also shape which firms win in payments going forward, since restrictions on rewards would affect the commercial incentives of exchanges and fintechs.

Senate Banking staff are weighing letters from both sides as they consider potential fixes or clarifying language during upcoming hearings.

Regulators who must implement the GENIUS Act have been urged to issue rules that prevent evasion of the ban, and lawmakers may face pressure to either leave the law as written or to craft narrow changes aimed at banks’ concerns.

Featured image from Unsplash, chart from TradingView