Blockchain Association Pushes Back Against Expanding Stablecoin Yield Ban
The crypto industry's main lobbying arm is drawing a line in the sand over stablecoin regulation.
Why the Pushback?
Regulators are eyeing a broader crackdown on yield-bearing stablecoins, arguing they pose systemic risks akin to unregulated money market funds. The Blockchain Association counters that this stifles innovation and punishes responsible actors for the sins of a few bad players—a classic regulatory overreach, in their view.
The Innovation Argument
Proponents say yield mechanisms are a core feature of decentralized finance, allowing capital to work efficiently without traditional intermediaries. Banning them, they argue, would simply push activity offshore or into shadowy, unregulated corners of the internet—achieving the opposite of regulatory intent.
A Familiar Pattern
This fight echoes decades of financial innovation clashing with legacy frameworks. The association's stance highlights a growing tension: should new technology be forced into old boxes, or do the boxes themselves need redesigning? After all, Wall Street has spent generations perfecting the art of generating yield from thin air—just with better lobbyists and fancier suits.
The outcome could dictate whether the next generation of financial tools gets built in the open or in the shadows.
The coalition emphasizes economic data
A criticism of rewards in stablecoins is that rewards could pose a threat to community banks or limit lending. The coalition, however, presented the findings of an analysis by Charles River Associates from 2019 to 2025 that did not observe any withdrawal in deposits from the community banks.
Moreover, the letter noted that U.S. banks hold around $2.9 trillion in reserves at the Federal Reserve, earning interest. According to the signatories, concerns about rewards reflect protection of existing revenue models rather than genuine safety risks.
Lindsay Fraser, Chief Policy Officer at the Blockchain Association, highlighted the stakes in a post on X, “125+ organizations and companies are aligned: rolling back lawful stablecoin rewards WOULD take money out of consumers’ pockets, reduce choice, and suppress competition.” Fraser also emphasized that the GENIUS Act already balances innovation and consumer protection.
Stablecoin rewards support competition and innovation
The coalition explained that the key to competition in the industry is the use of rewards, which enable new means of payment to compete with the existing ones. Rewarding the use of new means of payment can have the benefit of speeding up settlement and lowering the cost of transactions.
Moreover, the organizations suggested that opening debates about rewards before the full implementation of the GENIUS Act could create uncertainty with regard to the predictability of the market. This could be harmful to the bipartisan support that would be needed to establish legislation related to digital assets.
Engagement and dialogue with the regulatory community
The Blockchain Association is also actively interacting with the regulators. On August 27, the Crypto Task Force of the Securities and Exchange Commission (SEC) held a meeting with the Blockchain Association, Multicoin Capital Management, Blockchain Capital, and Sullivan & Cromwell LLP. They discussed the regulatory aspects of custody requirements for investment advisers and tokenization.
The group emphasized that the existing framework, intended for traditional securities, creates complexities for crypto-companies. Therefore, they demanded a structure that facilitates crypto-related advisory work without any hurdles.
The attendees consisted of CEO Summer Mersinger, Senior Counsel Laura Sanders, and legal counsel for the firms. The aim was to make them understand the dynamic nature of regulatory techniques in crypto. Another individual, Fraser, said that the process of creating policy requires education and building a coalition.
Stablecoin market hits $310B in 2025
Notably, stablecoins registered significant growth in 2025, with the aggregate market value amounting to around $310 billion, up by $103 billion or 50.2% from the previous year. According to analyst CryptoDep, “Over the year, the total stablecoin market capitalization ROSE to approximately $310B, increasing by $103B, which represents a 50.2% year-over-year gain.”
⚡️ Stablecoin Supply Growth in 2025
Over the year, the total stablecoin market capitalization rose to approximately $310B, increasing by $103B, which represents a 50.2% year-over-year gain.
Beyond the market leaders @Tether_to and @Circle, notable supply growth was also… pic.twitter.com/LSOw5Cx2V6
Although market leaders Tether and Circle dominated in the market, other stablecoins also witnessed significant growth in this sector. CryptoDep further said that apart from major players in this market notable supply growth was also recorded by USDS, USDe, RLUSD, and USD1. The current stablecoin market cap stands at $309 billion as of writing, as per DeFiLlama.
Keeping stablecoin rewards legal helps people have more options, supports healthy competition, and keeps innovation alive. Trying to limit these rewards could upset the balance set by the GENIUS Act and slow down the U.S. from leading in digital finance.
Also Read: Bybit Returns to UK Under FCA-Compliant Framework
