We’re just one day from the Senate Banking Committee’s high-stakes markup to rearrange the traditional financial system for the sake of crypto. For one crucial fight inside the sprawling market structure bill, however, the banking sector seems to have secured the upper hand over crypto: stablecoin yield restrictions.
We can’t say that for certain. The bill remains unfinished. Dozens of amendments are in the works. And key lawmakers of both parties continue to withhold support for the latest draft.
“I have no idea how I’m going to vote,” Sen. John Kennedy (R-La.), a Banking Committee member, told us Tuesday afternoon.
But all public signs point to momentum behind banks and their political allies, who have maximized their leverage in last-minute talks around the treatment of stablecoin yield. Sens. Thom Tillis (R-N.C.), Angela Alsobrooks (D-Md.) and Katie Britt (R-Ala.) have played a crucial role in elevating banks’ concerns in recent days.
Crypto exchanges, led by Coinbase, have sought broad latitude to offer rewards for customers who hold or use crypto, part of an effort to improve digital asset adoption among the public. Top negotiators supported the crypto position for months and wanted to avoid another fight over stablecoins.
But bankers have repeatedly warned lawmakers that such arrangements from their less-regulated counterparts could cause a “deposit flight” out of the traditional financial system, particularly among community banks, with downstream economic impacts in towns and smaller cities nationwide. In recent days, enough senators have acknowledged that risk that the dynamics on the Banking Committee have flipped.
Crypto wasn’t strictly thrilled with the stablecoin language released by the Banking panel late Monday night. But industry allies put on a happy face on Tuesday. “I’m cautiously optimistic we’ve got a workable bill. Sen. Tim Scott deserves the Nobel Peace Prize,” Sen. Bernie Moreno (R-Ohio) said.
Yet bank allies remain unsatisfied. Tillis and Alsobrooks emphasized on Tuesday that the work on yield wasn’t done yet. Market structure legislation isn’t about to advance through the Banking Committee without lawmakers like Tillis, Alsobrooks, Britt and Kennedy.
“I think we’ve had a lot of progress,” Alsobrooks said Tuesday after we asked about yield. “Still a few loopholes that I think we have to address, and we’re still talking. This is still very fluid.”
Asked about yield minutes later, Tillis told reporters: “I don’t think it’s solved yet.”
There are clear, public signs of discontent among the crypto faithful. Blockchain Association CEO Summer Mersinger released a remarkable statement on Tuesday that chastised the “relentless pressure campaign by the Big Banks to rewrite this bill to protect their own incumbency.”
In another episode, White House official Patrick Witt, who has been a leading crypto liaison in these talks, not-so-subtly threatened the banking industry with credit card swipe fee reform on Tuesday evening if it didn’t “take the deal being offered on stablecoin rewards and yield.”
These aren’t the types of messages you blast out when you think your side is winning.
We’re also skeptical the Credit Card Competition Act is going to be a real cudgel in these talks. Crypto market structure legislation will head straight to the floor if it can limp out of committee. The path for swipe fee reform and other credit card restrictions is far more precarious.
