U.S. Senators Negotiate Stablecoin Rewards Compromise in Market Structure Bill

U.S. lawmakers are negotiating a compromise on stablecoin rewards programs as part of the proposed Digital Asset Market Clarity Act, a market structure bill intended to establish regulatory rules for digital assets in the United States. The negotiations follow objections from the banking industry, which argues that stablecoin rewards could encourage deposit outflows from traditional banks.

Lawmakers Seek Balance Between Innovation and Banking Concerns

Senator Angela Alsobrooks of Maryland, who is working with Senator Thom Tillis of North Carolina on the issue, said discussions are focused on creating safeguards that address bank concerns while allowing innovation in the digital asset sector.

Speaking at a summit hosted by the American Bankers Association in Washington, Alsobrooks said both the banking sector and the crypto industry may need to accept compromises.

According to Alsobrooks, the proposal under discussion would introduce regulatory “guardrails” designed to reduce the risk of deposit flight while allowing certain forms of stablecoin-related incentives to continue. Banks have argued that reward programs tied to stablecoin balances function similarly to interest on deposits, potentially diverting funds away from the banking system.

Narrower Stablecoin Rewards Under Discussion

Current negotiations appear to focus on allowing a limited category of rewards programs, potentially linked to specific stablecoin activity rather than account balances.

The debate builds on provisions from the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which prohibits payment stablecoin issuers from offering interest to attract users. American Bankers Association President Rob Nichols said the restriction could be undermined if crypto exchanges or affiliated firms provide similar rewards programs outside the issuer framework.

Transaction-Based Incentives Gain Attention

Senator Mike Rounds, also a member of the Senate Banking Committee, said lawmakers are still evaluating how rewards should be treated under the proposed legislation. He suggested that incentive programs tied to transaction activity may be more acceptable than those linked to the amount of funds held in stablecoins.

The banking industry has advocated for strict limits on reward programs. However, some financial institutions appear open to narrower approaches. JPMorgan Chase CEO Jamie Dimon recently indicated that transaction-based rewards may be acceptable if they avoid functioning as deposit-like interest.

Regulatory Interpretation Remains Unclear

Regulatory clarity may also depend on guidance from the Office of the Comptroller of the Currency (OCC). The agency recently proposed a rule reflecting key elements of the GENIUS Act, though its treatment of stablecoin rewards has been interpreted differently by industry participants.

The OCC has stated that it will not allow structures designed to bypass the interest prohibition applied to stablecoin issuers. However, industry participants have indicated that reward programs structured as customer incentives rather than yield payments could still operate within the proposed framework.

Legislative Path Still Faces Political Hurdles

The next legislative step would be a markup hearing in the Senate Banking Committee, which had previously been delayed. If approved, the bill could be merged with a version that has already passed the Senate Agriculture Committee before moving to a full Senate vote.

Several issues remain unresolved. Some Senate Democrats have raised concerns about decentralized finance (DeFi) risks and the potential for illicit activity within decentralized protocols. Others have called for filling vacant regulatory positions at the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Additional political disagreements could also affect the bill’s progress. One proposal under discussion would restrict senior government officials from profiting from personal crypto-related business interests.

Legislative timing may also pose challenges. Senate floor time remains limited, and other geopolitical and domestic policy priorities could delay consideration of the digital asset market structure bill.