Stablecoin Wars Heat Up in Washington: Crypto Innovators vs. Wall Street Giants
In Washington, the conflict between the cryptocurrency industry and Wall Street over yield-bearing stablecoins is getting more intense. Will Beeson, the former head of tokenized asset infrastructure at Standard Chartered, believes that the stablecoin market needs more choices for providing income to customers.
In a competitive market with others issuing their own stablecoins, you end up in a situation where you’re looking for ways to incentivize users to use your stablecoin. The ability to pay yield would be an important way to do that.
Beeson
Stablecoin Yields, Banks, and the Future of Savings
Beeson’s remarks coincide with the GENIUS Act, a law signed by President Donald Trump in July that establishes the first official framework for stablecoin trade and issuance in the United States. Although the law forbids issuers from paying yield, it does not forbid exchanges or other third parties from providing interest or rewards on stablecoin holdings. For example, Coinbase, a cryptocurrency exchange, offers yield through a third party by paying interest on USDC balances kept on its platform in Circle’s stablecoin USDC.
What is prohibited under GENIUS is the ability for stablecoin issuers to pay interest or yield directly to holders. The bill does not prevent intermediaries or third parties from paying incentives. My understanding is that it has to do with requests by the banking lobby as the regulation was structured, and fears about yield-bearing stablecoins effectively providing a much more attractive savings tool than lower-yielding bank deposits,
Beeson
Banks Warn Congress: $6.6 Trillion at Risk from Stablecoin Loophole
Banks have urged Congress to shut the door entirely. Four significant trade groups, including the Bank Policy Institute, cautioned lawmakers about the dangers of preserving the alleged loophole in a letter dated August 12. They warned that it would deplete the U.S. deposit system by up to $6.6 trillion.
Without an explicit prohibition applying to exchanges, which act as a distribution channel for stablecoin issuers or business affiliates, the requirements in the GENIUS Act can be easily evaded and undermined by allowing payment of interest indirectly to holders of stablecoins,
the letter
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