The White House is pushing to finalize comprehensive cryptocurrency market structure legislation by March 1, with a central provision that would ban companies from offering rewards or yields on idle stablecoin balances. This decision emerged from high-level discussions this week involving major crypto firms, traditional banks, and federal regulators.
The draft legislation, labeled as a Senate discussion draft for the 119th Congress, outlines a framework to regulate digital commodities under the oversight of the Commodity Futures Trading Commission (CFTC). A key outcome of recent meetings is that "earning yield on idle crypto balances," which was a major goal for crypto companies, is now officially off the table. The debate has now narrowed to whether crypto firms can offer rewards linked to specific, structured activities like lending, rather than passive holding.
The meetings were described by participants as "productive" and "constructive." They were led by the White House, which presented draft text. The crypto industry was represented by behemoths including Ripple, Coinbase, venture firm a16z, and the Blockchain Association. Traditional finance was represented by the American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America.
Enforcement of the idle yield ban would be severe, with penalties potentially reaching up to $500,000 per violation per day. Authority would be granted to the Securities and Exchange Commission (SEC), the Treasury Department, and the CFTC. Banks are reportedly still pushing for a formal deposit outflow study, concerned that widespread stablecoin adoption could pull funds from traditional bank deposits, reducing their lending capacity.
Ripple advocate John Deaton reacted strongly to the banks' stance, stating on X (formerly Twitter), "Banks have been the enemy of regular people for as long as I've been alive," criticizing their efforts to ban stablecoin yields.
Despite the setback on yields, many in the crypto industry view the broader bill as a positive step toward regulatory clarity. The legislation aims to create clear rules around custody, exchange oversight, token classification, and the division of authority between the SEC and CFTC. This clarity could reduce regulatory risk and potentially unlock long-term institutional capital that has been hesitant due to unclear enforcement standards.
