The boundless optimism that had enveloped the cryptocurrency industry during the first year of President Trump's second term is now being replaced by anxiety, as a closely-watched crypto market structure bill has been delayed due to intense debate over the treatment of stablecoins. On Wednesday, the U.S. Senate Banking Committee postponed discussions on the highly anticipated bill, just hours after Coinbase Global, Inc. (COIN.US) withdrew its support for the latest version. Committee Chairman Tim Scott issued a statement announcing the delay, citing ongoing bipartisan negotiations, but he did not provide a new date for consideration.
One of the provisions strongly opposed by Coinbase Global, Inc. and other digital asset companies is a potential restriction on their ability to offer yields or rewards on customers' stablecoin holdings. Coinbase Global, Inc. generates interest from the USD Coin (USDC) that users keep on its platform and then distributes a portion of that interest to users under the label of "rewards." A potential ban on this practice would lead to a sharp decline in Coinbase's stablecoin interest income. The company insists these are merely "marketing rewards," not "interest on deposits." Conversely, banks are concerned this amounts to "offering high interest to attract deposits" without being subject to reserve requirements or FDIC insurance, while also worrying that such practices could divert deposits away from traditional banks.
Ari Redford, Head of Global Policy and Government Affairs at TRM Labs, pointed out, "Stablecoin rewards sit at the intersection of payments, deposit-like behavior, and market incentives." He added that this also explains why "a narrow technical issue has evolved into a core policy question during the bill's consideration." The latest proposal suggests prohibiting cryptocurrency exchanges from offering rewards linked to holding stablecoins, though it might permit certain types of rewards. However, Nana Murugesan, a former senior executive at Coinbase Global, Inc., stated that the wording regarding precisely which rewards are allowed remains unclear.
Furthermore, restrictions on such rewards could place regulated crypto companies in the U.S. at a competitive disadvantage. Murugesan indicated, "If there are any restrictions, theoretically this would only disadvantage U.S. companies, while overseas firms would continue to offer rewards." Stablecoins are a critical pillar of the cryptocurrency ecosystem, and their usage has surged since the U.S. passed relevant regulatory legislation last July. After the crypto industry successfully helped elect Trump and pushed for the passage of the stablecoin bill, industry executives now fear that the deadlock over stablecoin treatment could hinder the U.S. regulatory framework from keeping pace with other markets.
Dina Markova, Policy Lead at crypto custody service provider Fireblocks, expressed concern, stating, "This delay is worrying because it could leave the U.S. as one of the few major digital asset hubs without a clear rulebook for capital markets by 2026." Coinbase Global, Inc.'s swift reaction also hints at how the crypto industry is wielding its newfound influence in Washington. Coinbase CEO and Trump supporter Brian Armstrong posted on X that he was withdrawing support for the bill's latest text due to "too many issues." However, this drew a rebuttal from Senate Banking Committee member Senator Cynthia Lummis, who posted on X that such reactions from crypto companies "prove they just aren't ready yet."
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