Banks Reject Senate Stablecoin Yield Deal, Seek Tighter Cap

Major U.S. banking associations rejected the Senate’s draft language on stablecoin yields, saying the proposal “falls short” and urging lawmakers to tighten limits to prevent deposits moving out of banks.

On May 4 the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America issued a joint statement calling for changes to the draft. The groups wrote that the current wording does not clearly prohibit payment of yield or interest on stablecoins and described a “significant loophole” that must be fixed.

The contested language, negotiated by Senators Thom Tillis and Angela Alsobrooks, seeks to define how stablecoin rewards are treated. Banking groups say the draft allows rewards to be calculated by reference to duration, balance and tenure — structures they say could function like deposit interest and encourage customers to hold stablecoins instead of insured bank accounts.

The associations argued that such arrangements could lead to sustained flows out of deposit accounts and into digital-asset platforms, with potential implications for deposit stability. They urged Congress and regulators to adopt an explicit ban on interest-like payments tied to stablecoins to avoid regulatory gaps.

Journalist Eleanor Terrett noted that large retail banks are not fully aligned with the redacted draft while some community banks would accept the current wording. Terrett wrote on social media that for some banks “it’s not a true compromise because it doesn’t eliminate yield completely, it just changes how it’s offered,” and she added that banks may press other Senate Banking Committee members before the bill goes to markup.

Supporters of the Tillis-Alsobrooks language have said a narrowly drawn rule could create clearer lines for digital-asset markets while allowing certain payment uses for stablecoins. Banking trade groups counter that the draft still permits digital-asset firms to design products that replicate the economic effect of paying interest without using the term “interest.”

The trade groups said they will press the Senate for legislative fixes before the Banking Committee completes markup. Lawmakers will consider the banking sector’s concerns about deposit stability alongside proposals aimed at establishing clearer rules for the fast-growing stablecoin market.

The debate over precise statutory language on stablecoin rewards is likely to shape how the United States regulates stablecoins and related payment services in the months ahead.