Sneak Peek: Senate Crypto Bill Bans Stablecoin Yield, Shields DeFi

TLDR

• The U.S. Senate released a new draft of the crypto market structure bill just after midnight.
• The bill prohibits digital asset service providers from offering yield solely for holding payment stablecoins.
• Transaction-based rewards and activity incentives are still allowed under the proposed legislation.
• The bill uses the GENIUS Act’s definition of digital asset service providers which includes exchanges and custodians.
• Provisions addressing decentralized finance remain in the bill although protections appear weaker than before.

A new version of the crypto market structure bill surfaced just after midnight, giving a clearer picture of Senate priorities, as lawmakers prepare to debate the legislation on Thursday, with key deadlines for amendments set for Tuesday evening, leaving industry stakeholders with limited time for review.

Stablecoin Yield Restrictions Clarified

The bill prohibits digital asset service providers from offering interest or yield only for holding payment stablecoins. It states, “A digital asset service provider may not pay any form of interest or yield…solely in connection with the holding of a payment stablecoin.” However, the text allows transaction-based rewards and activity incentives, as outlined in a compromise led by Senator Angela Alsobrooks.

This clause aims to shield the business model of community banks while limiting passive crypto income. Industry voices, including Coinbase, reportedly viewed the compromise as constructive and necessary to end weeks of debate. The bill uses the GENIUS Act‘s definition of “digital asset service provider,” including custodians, exchanges, and token issuers.

The section resolves one of the most disputed points in recent negotiations between the crypto sector and banking lobbyists. The compromise may limit certain platforms from offering passive income, which has drawn scrutiny from regulators. Still, the bill does not restrict stablecoin transaction activity or staking under other mechanisms.

DeFi and Developer Provisions Survive

The bill outlines a new framework for decentralized finance (DeFi), though protections appear weaker than in prior drafts. The updated draft includes oversight mechanisms for DeFi protocols, although it does not eliminate developer protections. Early reviewers said the language appeared softer but retained core provisions despite pressure from traditional finance groups.

Sections on DeFi appeared for the first time in full within the latest release. While earlier versions lacked these details, the new text includes developer-specific provisions. The Blockchain Regulatory Certainty Act, recently introduced, was also included in the final document.

While the text aims to regulate DeFi activity, it stops short of labeling protocol developers as liable. There are still concerns about enforcement clarity, but the bill leaves some room for innovation. However, insiders noted that the new draft leans slightly more towards regulator-friendly language.

Securities Terms and Committee Schedule

The legislation expands on the Senate’s earlier introduction of the “ancillary asset” category, which remains absent from the House version. It excludes “network tokens,” including assets currently part of ETFs, from being categorized as securities. This could apply to digital assets like XRP, Solana, and Chainlink’s LINK.

The bill tasks the Securities and Exchange Commission with overseeing digital asset securities. It also includes language on illicit finance and responsible innovation. Provisions appear to differentiate between payment tokens and investment contracts.

Senators have until Tuesday evening to file proposed amendments. The Senate Banking Committee will mark up the legislation on Thursday. A separate hearing in the Senate Agriculture Committee has been delayed until later this month.

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