US Lawmakers Debate Stablecoin Yields and DeFi Developer Protections

TLDR

• Senators question stablecoin rewards and deposit flight risks.

• GENIUS Act bars issuers from paying direct interest to holders.

• Regulators report no evidence of large scale deposit outflows.

• New bipartisan bill aims to protect noncustodial crypto developers.

US lawmakers are advancing two major crypto policy discussions this week, focusing on stablecoin yield rules and legal protections for decentralized finance developers. The debate reflects broader efforts to define how digital asset innovation fits within existing financial laws.

During a Senate Banking Committee hearing, lawmakers revisited concerns that stablecoin rewards may resemble bank deposits. At the same time, House members introduced a bipartisan bill aimed at shielding noncustodial software developers from criminal liability.

Stablecoin Yields Face Renewed Scrutiny

Sen. Angela Alsobrooks said lawmakers support financial innovation but remain cautious about stablecoin rewards. She stated that offering a bank like product without comparable protections raises policy concerns.

The GENIUS Act, passed in July, prohibits stablecoin issuers from paying direct interest to token holders. However, the law does not restrict third party platforms from offering rewards tied to stablecoin usage.

Community banking groups have argued that yield-bearing stablecoins could shift deposits away from traditional institutions. A study from the Independent Community Bankers of America projected that allowing yield payments could reduce industry deposits and lending capacity.

Crypto firms have challenged those findings. Coinbase executive Faryar Shirzad previously stated that there is

Regulators Report No Widespread Deposit Flight

During questioning, several senators asked regulators whether they had observed large scale deposit movement linked to stablecoins. FDIC Chair Travis Hill said banks continue to perform well and reported no evidence of major outflows.

Sen. Bernie Moreno asked whether regulators had seen “massive deposit flight.” Officials from the FDIC, OCC, Federal Reserve, and National Credit Union Administration responded that they had not.

Sen. Thom Tillis said he plans to request an independent assessment on deposit flight risks before Congress considers further action. Meanwhile, Senate Banking Committee Chair Tim Scott said internal research showed deposits increased after the GENIUS Act became law.

The Office of the Comptroller of the Currency also released a proposal outlining how it will oversee qualified stablecoin issuers. Regulators indicated they are working to clarify how banks can support digital asset services under the new framework.

Lawmakers Introduce Bill to Shield DeFi Developers

In parallel, Representatives Scott Fitzgerald, Ben Cline, and Zoe Lofgren introduced the Promoting Innovation in Blockchain Development Act of 2026. The bipartisan proposal seeks to clarify that federal money transmission laws apply to entities that control user funds, not open source developers.

The bill narrows the scope of 18 U.S.C. Section 1960, which governs unlicensed money transmitting businesses. Lawmakers said the statute was written for traditional financial intermediaries and not decentralized software tools.

The proposal follows high profile prosecutions involving Tornado Cash and Samourai Wallet developers. Supporters argue that developers who write or maintain noncustodial code should not face criminal liability if they do not custody or transmit funds.

Industry groups, including the Blockchain Association and DeFi Education Fund, have supported clearer distinctions between custodial operators and software developers. Congressional discussions on the CLARITY Act and broader market structure reforms are expected to continue.

The dual debates over stablecoin yields and developer liability signal an active phase in US crypto policy. Lawmakers are weighing financial stability considerations alongside calls for regulatory clarity in decentralized finance.