US stablecoin holders appear set to lose passive ‘rewards’

U.S. stablecoin holders are almost certain to lose their ability to claim ‘rewards’ for passively holding the tokens, while a leading infrastructure provider claims stablecoin payments will require blockchains with seriously scalable bandwidth.

March 1 was the White House’s self-imposed deadline for resolving the stablecoin ‘yield v reward’ debate between the banking sector and crypto platforms like the Coinbase (NASDAQ: COIN) exchange. The issue is considered one of the main sticking points preventing the advancement of the Senate Banking Committee’s digital asset market structure legislation (the CLARITY Act).

(So you know: banks fear customers will withdraw deposits to chase higher interest via crypto platforms’ stablecoin ‘rewards.’ The banks want these platforms to be subject to the same ‘yield’-paying prohibitions applied to stablecoin issuers in the GENIUS Act. The platforms claim that banks’ fears are unjustified and banks just don’t want to compete to keep those customers.)

With the most recent White House-moderated meeting (the third) between these squabbling stakeholders failing to achieve a mutually acceptable compromise, Decrypt’s Sander Lutz tweeted on February 27 that a banking source had told him the two sides were still miles apart. Lutz’s source said chances of CLARITY advancing in March “could drop to near-zero.”

Lutz’s source also said, “There’s a very real likelihood that this thing falls apart unless [Coinbase CEO] Brian Armstrong comes to the table.” Armstrong’s abrupt withdrawal of support for CLARITY in January was based on his view that a rewards ban—which would impact one-fifth of Coinbase’s revenue—was a dealbreaker.

Pushback on Lutz’s tweets was immediate, with White House crypto advisor Patrick Witt, who has overseen the stakeholder negotiations, mockingly calling the banks’ (alleged) position a “bold strategy. Let’s see if it pays off for them.” White House ‘AI & Crypto Czar’ David Sacks was quick to defend Witt’s role in the negotiations, adding that “crypto has made major concessions on stablecoin yield; time for banks to reciprocate.”

Coinbase’s chief policy officer, Faryar Shirzad, also weighed in, defending both Witt and Armstrong, while claiming that Coinbase has “committed to multiple potential compromises.” Lutz acknowledged the pushback but noted that neither crypto stakeholders nor White House officials had “pushed back on the banking-side assertion that a deal is still some ways away.”

Enter Crypto in America journo Eleanor Terrett, who tweeted that “a banking-side source” had told her the banking reps who attended the last White House negotiation “do not share [Lutz’s] unnamed source’s views.” Terrett also claimed that the banking reps continue to offer input on CLARITY’s stablecoin language, “and aren’t necessarily living or dying by the March 1st deadline.”

Ripple Labs CEO Brad Garlinghouse added his two cents, saying, “The door to a deal is wide open. The banks just need to act in good faith and walk through it.” Witt retweeted Garlinghouse’s tweet, adding a ‘bulls-eye’ emoji.

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OCC appears to take banks’ side

Witt said last week that there was no plan to “revisit” GENIUS to close the third-party yield loophole, noting that this would “disrupt” efforts by federal agencies to craft the rules for implementing the stablecoin-focused legislation.

Witt’s comment came as the Treasury Department’s Office of the Comptroller of the Currency (OCC) dropped a 376-page draft of its proposed rules for implementing GENIUS. The OCC is one of several federal agencies that have input into how GENIUS is implemented, and the OCC has given stakeholders a 60-day window in which to weigh in with their comments on its proposed rules.

Under the draft’s ‘prohibited activities’ section (starting on p.36), the OCC notes that GENIUS bans stablecoin issuers from paying token-holders any interest/yield “solely in connection with the holding, use, or retention” of those tokens. The OCC proposes including “a presumption” in the final GENIUS rules that “certain types of arrangements with certain types of persons would be prohibited payments of yield or interest by the issuer.”

These ‘arrangements’ would loop in “an affiliate or a related third party” that has “a contract, agreement, or other arrangement to pay interest or yield (whether in cash, tokens, or other consideration) to a holder of any payment stablecoin issued by the permitted stablecoin issuer solely in connection with the holding, use, or retention of such payment stablecoin.”

The OCC stressed that the prohibition “is not intended to prevent a merchant from independently offering a discount to a payment stablecoin holder for using payment stablecoins.” The emphasis on ‘using’ mirrors CLARITY’s language, which would permit platforms like Coinbase to offer rewards for certain stablecoin-based activities while maintaining a ban on rewards linked to passive holding of the tokens.

The OCC’s proposal appears to be a clear shot across Coinbase’s rewards bow, but Coinbase execs have yet to respond (at least, not publicly). Meanwhile, top execs at Circle (NASDAQ: CRCL), issuer of the USDC stablecoin on which Coinbase’s rewards program is focused, had nothing but praise for the OCC’s proposals.

Circle’s chief policy officer, Dante Disparte, tweeted that the OCC’s report is “equally worthy of praise as it is an in-depth reading.” Circle CEO Jeremy Allaire was quick to agree, tweeting that the report is “all part of accelerating U.S. leadership in transforming the economic and financial system and rebuilding it natively on the internet.”

On the other side of this debate, the American Banking Association (ABA) responded to the OCC proposal by acknowledging the regulator’s efforts to clarify the yield/reward issue but otherwise offered no comment.

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Tether issues first USAT attestation, kills off yuan-backed stablecoin

Circle’s archrival Tether, issuer of the market-leading USDT stablecoin, launched its own GENIUS-compliant stablecoin (USAT) in January. On February 28, USAT, which was issued via Tether’s partnership with Anchorage Digital, issued its first monthly report on the fiat reserves backing the token.

While USAT was reportedly launched with a mere $20 million market cap, $2.5 million of that has yet to be issued. USAT’s reserve report shows the amount of reserve cash and reverse repurchase agreements (collateralized by U.S. Treasury bills) at just over $17.6 million, about $100,000 above the amount of “USAT redeemable tokens outstanding.”

This reluctance allegedly persists despite the same ‘big four’ increasing their relationships with digital asset firms in recent years. But it’s perhaps not surprising, given Tether’s pattern of withdrawing products/services from markets in which the regulatory spotlight grows too bright.

Case in point: on February 20, Tether announced its decision to “discontinue support for CNHT,” its Chinese yuan-denominated stablecoin. This involves an immediate halt to issuing new CNHT, followed by the company halting “redemption support” for the token in one year’s time.

Tether claimed to have made the decision based on “evolving market conditions, low interest in the product, and limited sustained community demand for CNHT relative to other supported assets. CNHT’s usage levels don’t justify the continued operational support required to maintain it at the standards Tether applies across its products.”

However, Tether’s decision came hot on the heels of Chinese authorities explicitly declaring war on so-called ‘offshore yuan’ stablecoins issued without China’s approval. While Beijing’s announcement didn’t mention CNHT, it did namecheck Tether, the only stablecoin issuer to receive this dubious designation.

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Stripe: stablecoins will require massively scaling blockchains

Last week, payment processor Stripe issued its annual letter to the ‘Stripe community’ regarding the previous year’s financial performance. The company claimed its merchant partners handled $1.9 trillion in total volume, one-third better than 2024’s total. Stripe says it remains “robustly profitable” and expects to hit an annual revenue run rate of $1 billion in 2026.

Stripe’s annual letter offered this view of the digital asset sector’s current state: “It may be a crypto winter, but it’s a stablecoin summer.” Stripe expressed its interest in the stablecoin space in 2024 via its $1.1 billion acquisition of infrastructure stablecoin startup Bridge (which received conditional approval for an OCC national trust charter last month).

Stripe said Bridge saw its stablecoin volume “more than quadruple” last year. This was helped by Bridge striking deals with the likes of Visa (NASDAQ: V) to allow merchants and consumers to spend stablecoins, while the Phantom crypto wallet is using Bridge to issue stablecoin-linked cards to its 20 million customers.

Last September, Tempo, Stripe’s stablecoin-focused Layer-1 payments network, launched its testnet. Having undergone testing by the likes of Visa, Nubank, Shopify, and Klarna, Stripe said Tempo’s mainnet will launch “soon.”

Stripe noted that “today’s blockchains have been designed for trading and DeFi [decentralized finance], and the attributes that matter for payments (including throughput, reliability, cost predictability, and privacy) have not been a significant focus.”

Stripe warned that the “operational issues” of most blockchains—high fees, slow confirmation times, etc.—are “already significant” and “will only intensify” as the volume of on-chain payments grows. Throw in agentic AI and “we will likely need blockchains that support more than one million—or even one billion—transactions per second.”

Gee, where have I heard that before?

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Meta wants to give users access to stablecoins, doesn’t want to launch its own

Many stablecoin Johnny-come-latelies really only started taking the technology seriously after Congress got serious about passing the GENIUS Act last year. Others, like Meta (NASDAQ: META), tried to play this game a few years ago with Libra/Diem, the company’s failed effort to launch an in-house token for its social media platforms.

Last summer, reports suggested Meta was once again looking to integrate stablecoins into its platforms via partnerships with third-party providers. Last week, Coindesk reported that Meta hopes to launch that integration in the second half of 2026.

Meta reportedly issued a request to certain third-party firms to integrate stablecoins and a custom wallet. Stripe was named as a ‘likely candidate’ for getting the nod, given its longstanding partnerships with Meta and Stripe CEO Patrick Collison joining Meta’s board of directors last April.

Given the nature of the internet, social media was soon abuzz with ‘Meta is launching its own stablecoin’ posts. Meta communications director Andy Stone quickly poured cold water on these claims, tweeting that “nothing has changed; there is still no Meta stablecoin. This is about enabling people and businesses to make payments on our platforms using their preferred method.”

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Europe not going down without a stablecoin fight

EURC, the euro-denominated stablecoin issued by Circle, has seen its market cap nearly quadruple over the past 12 months to €395 million ($461 million). That’s nearly three times the sum of the next highest euro-backed token, and a significant portion of EURC’s gains have come in just the past five weeks.

European Union central bankers have been sounding the alarm over the rise of dollar-backed stablecoins for a while now, but the fact that even the euro-backed token market is dominated by an American firm must really sting.

Enter Qivalis, the consortium of some of Europe’s leading banks that’s focused on launching a homegrown euro stablecoin fully compliant with the EU’s Markets in Crypto Assets (MiCA) Regulation. Last month, Qivalis welcomed BBVA (NASDAQ: BBVA), Spain’s second-largest bank, alongside existing members BNP Paribas (NASDAQ: BNPQF), Caixa Bank, Danske Bank (NASDAQ: DANSKE), Deka, DZ Bank, ING (NASDAQ: ING), KBC, Raiffeisen Bank (NASDAQ: RAIFF), SEB, Sella, and Unicredit.

Qivalis has yet to issue any tokens but has set a goal to launch in the second half of 2026. On Monday, Spanish media outlet El Pais reported that Qivalis is “in the advanced stages” of talking to prospective partners—exchanges, market makers, liquidity providers, etc.—to help their as-yet unnamed token take flight.

El Pais quoted Qivalis CEO Jan Sell, the former head of Coinbase Germany, saying the consortium’s ambitions for the new stablecoin went beyond the EU. The focus of the new token will be on “core use cases, such as facilitating real-time, cross-border business-to-business payments and global trade.”

As such, Qivalis isn’t limiting itself to partnering with EU-based entities, although MiCA compliance is a prerequisite. While Sell didn’t name names, El Pais claimed the Spain-based Bit2Me exchange had confirmed that it had ‘held talks’ with one of the Qivalis consortium members.

Qivalis isn’t the only banking consortium exploring a joint stablecoin project. Stateside, some of America’s biggest banks began discussing a stablecoin team-up last year, although many of the banks involved in these talks are simultaneously pursuing their own independent stablecoin projects.

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