By Amrith Ramkumar and Vicky Ge Huang
WASHINGTON -- The cryptocurrency and banking industries are locked in a lobbying battle over digital tokens that yield annual payouts, a fight that threatens to derail legislation intended to bring crypto into mainstream finance.
The two sides are clashing about what crypto firms call rewards, or annual payments to investors based on a percentage of their total holdings. They are commonly used for stablecoins, popular tokens typically pegged to the U.S. dollar and used for trading, overseas payments and money transfers.
To banks, rewards on stablecoins from companies such as Coinbase Global that pay out 3.5% resemble high-yielding deposits -- but without the regulations they face for holding customers' cash. Bank-industry groups have flooded lawmakers with letters and phone calls arguing the rewards would decimate Main Street lenders. The national average interest rate for a standard interest-bearing checking account is below 0.1%.
"We are hearing every day from community bankers who are worried about the impact stablecoins offering yield will have on their deposit bases and their ability to lend and support their local communities," said Brooke Ybarra, senior vice president for innovation and strategy at the American Bankers Association, an industry group. Thousands of bankers have sent senators letters through the organization in the past week.
The fight is one of the forces that delayed an expected vote Thursday by the Senate Banking Committee to advance crypto market-structure legislation. Sen. Tim Scott (R., S.C.) postponed a markup of the bill Wednesday night about 12 hours before it was slated to start, saying bipartisan negotiations are continuing. The bill would represent the industry's first regulatory framework for all digital assets. The House already passed its version of the bill, but Republicans likely need to win support from nearly everyone in their party and some Democrats to get 60 votes and pass it in the Senate.
The rewards fight has muddied the process by giving pause to some Republicans on the Senate Banking Committee who are loyal to banks, such as North Carolina Sen. Thom Tillis. It also has concerned some Democrats, who are also pushing for ethics restrictions in the bill to address President Trump's crypto activity and have other questions that could hamper the effort.
JPMorgan Chase, Citigroup and other big banks are pushing back on stablecoin rewards while simultaneously developing their own plans for cryptocurrency products and partnerships. Some, including Bank of America, are weighing whether to launch their own stablecoins.
Crypto leaders are accusing the American Bankers Association and other groups of making local lenders the face of their campaign when the effort is driven by the nation's biggest banks, which don't want crypto firms disrupting their established business. The incumbent financial firms argue that the loss of deposits will hit smaller banks especially hard.
"This is probably one of their biggest lobbying efforts we've seen in a long time," said Summer Mersinger, chief executive of the Blockchain Association, a crypto-industry group. The organization's advocacy helped lead last year to a new stablecoin law and an executive order by Trump establishing a new crypto-regulatory framework. "They are using the community banks to deliver a message that's really a much bigger deal for some of these larger banks," she said.
Members of Stand With Crypto, one of the industry's biggest grassroots organizations, have also flooded Congress with calls to pass industry rules. Brian Armstrong, chief executive of Coinbase, which started Stand With Crypto, said Wednesday in a social-media post that the company couldn't support the bill as written, citing issues including "draft amendments that would kill rewards on stablecoins."
The largest U.S. crypto exchange pulling its support could put the future of the bill in jeopardy even though other crypto firms said they still support it, analysts said.
The fight highlights the tension between crypto upstarts flexing their newfound lobbying muscle in Washington and established banks that have decadeslong relationships with Congress.
The Treasury Department estimated last year that stablecoins might drain as much as $6.6 trillion in deposits from the U.S. banking system, in part because of rewards. Total deposits in all U.S. commercial banks stood at about $18.7 trillion as of early January, according to the latest Federal Reserve data.
The U.S. government insures deposits of up to $250,000 but also imposes regulations on banks' business activities and financial strength.
The crypto clash comes as America's banks are waging other battles in Washington. Lenders are responding to Trump's call for a temporary cap on credit-card interest rates, endorsement of a bill that would aim to reduce the swipe fees merchants pay banks and credit-card companies for processing payments and a proposal to ban institutional investors from owning single-family homes. Those initiatives are all part of an administration push to address the high cost of living for consumers.
In a bid to find a compromise, a recent draft of the market-structure bill seeks to prohibit some rewards simply holding stablecoins, but allows them if they are tied to other activities such as using stablecoins for payments or receiving incentives or rewards.
"Dear banks, now might be a good time for you to take the deal being offered on stablecoin rewards and yield," Patrick Witt, head of Trump's Council of Advisors for Digital Assets, wrote Tuesday on X. He was referencing a post about potentially including the swipe-fee bill as an amendment to the market-structure bill.
The proposed language is still seen as inadequate by banking-industry groups that continue to push for a total prohibition of rewards and yield payments, people familiar with the discussions said. Many involved in the process are bracing for a messy amendment process Thursday, featuring proposals to expand and restrict rewards.
The bill's current language, for example, is unlikely to deter Coinbase from continuing to offer its 3.5% reward for consumers that participate in its Premium program and hold Circle stablecoins at the exchange, according to people familiar with the matter.
JPMorgan Chase finance chief Jeremy Barnum told analysts this week that banks faced some risk of losing customers to stablecoins and would be advocating that any laws opening up stablecoins come with regulation.
"I think we always embrace competition," Barnum said. "So, this is not about saying that we don't want to compete, but it's about avoiding the creation of a parallel ecosystem that has all the same economic properties and risks without appropriate regulation."
"Clearly, there is some risk for some firms, maybe for many firms, and some version of a threat to the business model."
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com
(END) Dow Jones Newswires
January 14, 2026 22:03 ET (03:03 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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