U.S. Senate Crypto Bill Sparks Banking War Over Stablecoin Rewards

Stablecoins just became the battleground where crypto innovation smashes into old-school banking walls.

The Regulatory Tug-of-War

A new Senate proposal is drawing lines in the sand. On one side: digital asset firms pushing to issue yield-bearing stablecoins. On the other: traditional banks clinging to their regulatory moat. The bill doesn't just tweak rules—it threatens to redraw the entire financial map.

Why Banks Are Sweating

This isn't about minor competition. It's about a fundamental bypass. The legislation could allow crypto entities to offer savings-like products without the capital reserves, lending oversight, or FDIC insurance that banks shoulder. Talk about wanting your cake and eating the yield too—a classic fintech move that leaves bankers grumbling about 'unlevel playing fields' over their third espresso.

The Stakes for Your Wallet

For users, the promise is simple: earn rewards on digital dollars parked in a wallet, not a bank account. The risk? Those rewards come with none of the traditional safeguards. The bill forces a brutal question—are you chasing yield, or are you prioritizing safety? The market's about to find out which one wins.

A System at a Crossroads

This clash was inevitable. Finance always evolves faster than regulation can chase it. Now, lawmakers must decide if they'll force crypto into the old banking box or build a new one. Either choice creates winners, losers, and a ton of volatility. One cynical take? The only guaranteed winners are the lobbyists billing hours by the thousand while arguing about what a 'bank' really is in 2026.

The fight's on. Your stablecoin rewards are the prize.

Analysts identify a significant challenge in the stablecoin ecosystem 

Sources described the “negotiated market structure bill” as a game-changer set up to tackle highly contentious issues at the negotiating table. Notably, these challenges sparked intensified discussions between cryptocurrency firms and the banking sector for weeks.

These sources decided to disclose the main content of the bill. They noted that this draft market structure bill clearly stated that digital asset service providers are not allowed to make interest or yield payments to users in relation to their stablecoin holdings. 

Nonetheless, they highlighted that these providers are permitted to offer rewards to their users in connection with specific activities, such as processing payments, staking, providing liquidity, or offering collateral. 

Interestingly, this newly released wording includes a compromise that Democratic Senator Angela Alsobrooks proposed last week. Alsobrooks played a key role in the talks. 

In her suggestion, crypto exchanges are permitted to issue yields to their users on stablecoins if clients carry out specific activities, such as selling their stablecoins. However, it forbids rewards for stablecoins that are just stored in an account.

With this finding, analysts concluded that challenges arising from issues related to stablecoins yields have generated considerable friction between banks and the crypto industry. 

At this point, banking groups have raised concerns that the GENIUS Act, a US federal law enacted in July 2025, has established gaps that enable issuers or platforms to provide interest-like returns, thereby initiating new liquidity risks.

Uncertainties surrounding rewards for stablecoins spark debate among individuals 

Reports clarified that the stablecoin law does not hinder third-party crypto platforms, such as the major crypto exchange and platform Coinbase, from issuing rewards to their users, despite prohibiting issuers from conducting direct interest payments.

After these reports highlighted this situation, several crypto firms declared that the matter was already settled at the time talks about the GENIUS Act were held, hence alleging that banks are attempting to restrict their competition.

Recognizing the increasing tension of the situation, Coinbase issued a warning that it WOULD withdraw its backing for the market structure bill if lawmakers decide to go beyond just implementing improvements in disclosure requirements and start to impose more stringent restrictions on reward programs. 

On the other hand, sources noted that, apart from stablecoins, the newly established draft comprises a bipartisan proposal from the US Senators RON Wyden and Cynthia Lummis.

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