- Key insight: Lawmakers from both parties discussed concerns that weak restrictions on stablecoin rewards could displace billions from community bank lending, potentially harming small businesses, farmers, students, and homebuyers who depend on local credit availability.
- Forward look: Senate Banking Committee Chairman Tim Scott, R-S.C., may push for a markup of crypto market structure legislation as soon as next week — even without full bipartisan agreement — as senators continue negotiating key provisions of the bill.
- What’s at stake: The American Bankers Association and other banking groups are lobbying for stricter language to prevent stablecoin issuers from offering yield-like rewards, arguing companies are exploiting loopholes that allow them to indirectly provide returns to holders through partner exchanges.
WASHINGTON — The Senate Banking Committee is looking to mark up crypto market structure legislation
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A bipartisan group of senators huddled on Tuesday to discuss the current state of their market structure bill. Republicans would ideally like the bill to be bipartisan before marking up, but Senate Banking Committee Chairman Tim Scott, R-S.C., has indicated that he would push ahead with a markup even if it wasn’t, per Punchbowl News.
Bank groups have recently ramped up lobbying on the legislation, most recently with a letter from the American Bankers Association targeting stricter language around a prohibition for stablecoins to offer yield-bearing interest. While the GENIUS Act bans stablecoin issuers from offering yield on stablecoins, bankers have argued that firms can simply offer rewards that behave, in the view of many customers, identical to yield.
“Some companies have exploited a perceived loophole allowing stablecoin issuers to indirectly fund payments to stablecoin holders through digital asset exchanges and other partners,” a large group of bankers said in the letter to Congress organized by the American Bankers Association. “With this activity, the exception swallows the rule. If billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer.”
The yield and reward issue featured in today’s meeting, according to multiple people familiar with the discussion. Lawmakers in both parties don’t have a unified strategy of how to address the issue, but they talked about a potential loss of lending in local communities if stronger language isn’t included in the market structure bills, which marks progress for bankers involved in the discussions.