Banks vs. Crypto: Who Is Winning the Stablecoin Yield Fight?

Earning yield on idle stablecoin balances is “effectively off the table” in current U.S. legislative negotiations. That is the clearest takeaway from the White House's third closed-door meeting on stablecoin policy, held February 19. The debate has narrowed to one specific question: can crypto firms offer rewards tied to user activity and transactions, rather than simply holding stablecoins?

What Happened at the February 19 White House Meeting?

The session brought together crypto companies and banking trade groups for the third time to hash out language around stablecoin rewards. Unlike the previous two meetings, the White House took the lead in steering the conversation rather than letting either side dominate.

Attendees included representatives from Coinbase, Ripple, and Andreessen Horowitz (a16z), alongside trade groups including the Blockchain Association and the Crypto Council for Innovation. Bank voices were represented through trade associations including the American Bankers Association (ABA), the Bank Policy Institute, and the Independent Community Bankers of America (ICBA). No individual bank representatives attended this time.

Patrick Witt, Executive Director of the White House Crypto Council and President Trump's crypto adviser, brought draft legislative text to the table. That draft acknowledged bank concerns while making clear that any restrictions on stablecoin rewards would be narrow in scope.

What Is Stablecoin Yield, and Why Does It Matter?

Stablecoin yield refers to the returns that crypto platforms pay users for holding or using stablecoins. A stablecoin is a digital asset pegged to a fiat currency, most often the U.S. dollar. Because stablecoins do not fluctuate in price the way Bitcoin or Ethereum do, platforms have offered interest-like rewards on them as an incentive.

Coinbase, for example, has offered rewards to users who hold USDC on its platform. This is similar in appearance to a savings account, which is exactly what worries banks.

Banks generate revenue by taking in customer deposits and lending them out at a profit. If consumers move money into stablecoin reward products instead of bank accounts, banks lose a core part of their business model. That concern has been the central sticking point throughout these negotiations.

Why Are Banks Pushing Back on Stablecoin Rewards?

One crypto-side attendee at the February 19 meeting told journalist Eleanor Terrett that bank concerns appear to stem more from competitive pressure than from actual fears of deposit flight. "Deposit flight" is when customers rapidly move money out of banks, which can destabilize the financial system.

“Earning yield on idle balances, a key crypto industry goal, is effectively off the table,” Terrett noted. “The debate has narrowed to whether firms can offer rewards linked to certain activities.”

Bank-side sources, however, are still pushing for the final legislation to include a formal study examining how the growth of payment stablecoins could affect bank deposits over time.

Banks have also welcomed proposed anti-evasion language in the draft text. That language would give the SEC, Treasury, and the CFTC authority to enforce a ban on paying yield on idle stablecoin balances. The proposed penalties are significant: $500,000 per violation, per day. The CFTC is the Commodity Futures Trading Commission, a federal regulator overseeing derivatives markets, and the SEC is the Securities and Exchange Commission.

Where Do Negotiations Stand Now?

Progress has been made, but no deal has been signed. The White House pushed participants at the February 19 session to stay beyond the scheduled two hours, including collecting their phones to keep everyone focused. That pressure produced more movement, but not a final agreement.

The current position of the White House is that some stablecoin rewards must remain in the next draft of the Digital Asset Market Clarity Act, specifically rewards linked to activities and transactions rather than static holdings.

Key points about where things stand:

• Yield on idle stablecoin balances is likely to be prohibited under the current framework being discussed.
• Activity-based rewards, such as earning for transacting with stablecoins, remain under negotiation.
• Bank trade groups will brief their members on the February 19 discussions before any compromise is finalized.
• One source described an end-of-month deadline as not unrealistic.

What Is the Digital Asset Market Clarity Act?

The Digital Asset Market Clarity Act, sometimes called the Clarity Act, is the crypto industry's top legislative priority in Washington. It is designed to create a permanent regulatory framework for U.S. crypto markets.

The stablecoin rewards debate sits in Section 404 of the draft bill. Ironically, this section does not directly relate to market structure. What it does is propose changes to the GENIUS Act, formally known as the Guiding and Establishing National Innovation for U.S. Stablecoins Act, which became law in 2024 and gave crypto platforms relatively broad flexibility around stablecoin rewards.

If the current White House compromise is adopted, that flexibility would be reduced.

What Happens If Banks Reject the Compromise?

If banks refuse to accept limited rewards, the fallback position is the existing GENIUS Act. That law gives crypto platforms more freedom with rewards programs than the proposed Clarity Act would. Banks have an incentive to compromise because a deal would likely bring reluctant senators back into support for the legislation.

What Still Needs to Be Resolved?

Stablecoin rewards are just one of several unresolved points. Democratic lawmakers have insisted on a few major demands that remain unmet:

• A prohibition on senior government officials holding significant crypto business interests, a requirement directed at President Trump.
• Full commission appointments at both the CFTC and the SEC, including Democratic vacancies.
• Stronger anti-money laundering controls in decentralized finance (DeFi) markets. DeFi refers to financial services built on public blockchains without traditional intermediaries like banks.

None of these Democratic conditions have been resolved. The Senate Banking Committee has not yet scheduled a hearing to advance the bill. Without substantial Democratic support, the legislation cannot pass the full Senate.

Conclusion

Negotiations between crypto firms and banking groups are ongoing, with the White House now actively leading the process rather than facilitating from the sidelines. The practical outcome of these talks will determine whether platforms like Coinbase can continue offering stablecoin rewards in any form, and whether the broader Clarity Act can attract the bipartisan support it needs to become law.

Resources

1. Eleanor Terrett on X: Post on Feb. 19

2. Report by CoinDesk 1: Inside the meeting: White House favors some stablecoin rewards, tells banks it's time to move

3. Report by CoinDesk 2: Latest White House talks on stablecoin yield make 'progress' with banks, no deal yet