Stablecoins steady as White House weighs rewards rules

White House pushes limits on stablecoin rewards in market structure bill

The White House hosted a third closed-door meeting with crypto advocates and banking groups focused on resolving the stablecoin yield dispute, and participants described the session as more productive than earlier rounds, as reported by The Block. The talks center on whether and how stablecoin rewards should be permitted within the broader U.S. crypto market structure framework.

The administration has urged banks to accept a deal that would allow some form of stablecoin rewards while moving the market structure bill forward, according to CoinDesk. While no agreement has been reached, the direction under discussion would place guardrails on rewards to address traditional finance concerns without stalling the legislation.

Trade groups for banks have delivered written red lines seeking prohibitions or strict limits on reward features they view as interest-like, while crypto firms have pressed for targeted exemptions, especially for transaction- or activity-based rewards, as reported by crypto.news. That tension frames the central question now on the table: how to define and cap rewards without blurring into deposit-like interest.

Why it matters now for banks, issuers, and users

Time is a factor, with the industry seeking President Donald Trump and Congress to sign off on long-awaited rules and the legislative calendar narrowing, as reported by Barron’s. Any delay could push decisions into a more uncertain window, raising execution risk for both banks and crypto firms that are planning product roadmaps around the bill.

Industry leaders argue that deposit-flight fears are overstated and that allowing regulated stablecoin rewards would support innovation and competitive parity with banks. “Bank warnings about stablecoin rewards are ‘boogeyman’ issues,” said Brian Armstrong, CEO of Coinbase, via CNBC.

Policy analysts have emphasized that the risk to deposits appears modest today but could grow alongside adoption if rewards mimic interest paid simply for holding tokens. “Distinguishing rewards tied to transactions from those paid for holding is critical,” said Timothy Massad, former CFTC Chair, as cited by American Banker.

Bank trade groups, including the American Bankers Association and peers, continue to warn that reward-like features could siphon deposits, particularly from community banks, and want rules that preserve the margin of safety underpinning deposit insurance and other safeguards, according to coincentral. Their preferred baseline is to treat interest-like rewards as functionally equivalent to bank interest for regulatory purposes.

Despite friction, participants describe a path to middle ground if definitions and limits are clear enough to protect banks while enabling non-interest reward models for stablecoin issuers; advocates characterize the mood as trending toward compromise, as reported by Coinpaper. That outlook suggests lawmakers could still advance the market structure bill (often referenced as the Digital Asset Market Clarity Act/CLARITY Act) if the reward language stabilizes.

At the time of this writing, Coinbase Global (COIN) shares recently closed around $165.94 and traded near $165.31 after hours, offering a neutral backdrop as policy talks continue, based on data from Yahoo Scout. The stock figures do not imply regulatory outcomes but reflect investor attention to headlines on rulemaking and enforcement.

Interest versus rewards: how definitions drive regulation and risk

The crux of the debate is definitional: payments for simply holding a stablecoin resemble interest under traditional banking concepts, while rewards earned from transactions or specific user actions carry a different economic character. In policy terms, that distinction can influence licensing, consumer disclosures, prudential oversight, and how systemic risk is measured.

Negotiators have floated a spectrum of approaches, ranging from outright prohibitions or strict limits on holding-based, interest-like features to carve-outs for transaction- or activity-based rewards under prescribed conditions. Each path would affect stakeholders differently: community banks focus on deposit stability, issuers on product design and compliance scoping, and users on clarity about what a reward represents and the protections it does or does not entail. Final impacts will depend on the bill’s text and subsequent implementation by relevant agencies.