Web 3 Journalist
Tim Hakki
Web 3 Journalist
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High-stakes negotiations between U.S. banking giants and crypto executives at the White House hit a wall yesterday, ending in an impasse over stablecoin yields.
Banks demanded restrictive “prohibition principles” on holder rewards, while crypto leaders argued such bans would suffocate innovation in the digital dollar economy.
Key Takeaways
- Banks are pushing for a broad ban on all financial and non-financial benefits tied to holding payment stablecoins.
- Crypto firms, including Coinbase and Ripple, rejected the proposals, warning they would stifle competition.
- Treasury Secretary Scott Bessent faces a hard deadline of July 2026 to finalize GENIUS Act implementation rules.
Will Banking Interests Kill the Yield?
The core friction stems from the implementation of the GENIUS Act, signed in July 2025, which aims to regulate stablecoin issuance while insulating traditional banking deposits.
Banks argue that interest-bearing stablecoins threaten their liquidity models, essentially fearing a massive deposit drain if users can earn higher yields on-chain.
This regulatory tug-of-war highlights the industry’s shift toward a compliance-focused market where regulatory pressures now dictate project viability.
The White House Crypto Policy Council is scrambling to find common ground. Yesterday’s meeting was the second this month. With lawmakers and the industry hoping to finalize rules by the midterm elections this November, the clock is ticking.
Banks are effectively trying to firewall their deposit base from digital competitors, a move that could neuter the competitive advantage of non-bank stablecoin issuers.
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Inside the Closed-Door Battle at the White House
According to a document presented by the banking side during the session, which included Goldman Sachs and JPMorgan Chase, the banks laid out strict “prohibition principles.”
These principles call for a total ban on any benefits, financial or otherwise, tied to holding or using payment stablecoins. Attendees noted that banks took a hard line, demanding enforcement measures that go well beyond the current draft of the market structure bill.
While current legislative drafts generally bar passive yield, banks want to crush even limited activity-based rewards.
Crypto stakeholders, including the Blockchain Association and Ripple, reportedly “dug in” against these demands.
The banking sector insists that exemptions for stablecoin rewards must be extremely narrow in scope, leaving little room for the types of incentive programs that drive DeFi adoption.
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Implications for the Market
If these restrictions hold, the U.S. risks stifling the very innovation the GENIUS Act was meant to legitimize.
Investors should watch the July deadline closely; failure to compromise could force a capital to flee to jurisdictions with clearer, pro-yield frameworks.
Just as Venezuela’s anti-corruption investigation rocked its local crypto industry with aggressive shutdowns, a heavy-handed U.S. ban on stablecoin yields could severely impact domestic liquidity.
While banks aim to protect their deposit base from disruption, the crypto market views yield as a fundamental feature, not a bug.
If the banks win this round, the utility of U.S.-regulated stablecoins could be capped at simple transaction rails, stripping them of their investment potential.
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