Banks sharpen stance on stablecoin rules during White House clash as key crypto bill remains on ice

US banks sharpened their stance this week in a clash with the crypto industry that has put major legislation on ice in Congress.

Behind closed doors, the US banking industry shared a document calling for a prohibition on companies or other entities paying customers interest on their stablecoin balances during a second round of talks hosted by the White House’s crypto council.

That document served as the basis for the discussion during a Tuesday meeting on the issue, which is the major holdup in getting the Clarity Act through Congress, according to a source familiar with the matter.

Along with representatives for bank and crypto trade associations, policy staff from some of the country’s biggest banks, including JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS), PNC (PNC), along with reps from Coinbase (COIN), attended the White House meeting, according to people familiar with the matter.

Last summer, President Trump signed the GENIUS Act, which laid the legislative groundwork for the first federal framework regulating dollar-pegged stablecoins. Since then, a disagreement over whether crypto platforms should be able to pay customers “yield,” or interest on their stablecoin balances, has stalled the Clarity Act, which the Trump administration hoped to see passed before the midterm elections. Stablecoins are cryptocurrencies with values pegged to the US dollar, gold, or other fiat currencies and assets.

Read more: How stablecoins work

“No person may provide any form of financial or non-financial consideration to a stablecoin holder in connection with the payment stablecoin holder’s purchase, use, ownership, possession, custody, holding or retention of a payment stablecoin,” according to the document.

The document calls for “extremely limited” exemptions from the prohibition, warning that such a consequence would “drive deposit flight that would undercut Main Street lending.” It further stipulates that regulators must enforcement the prohibitions and have the authority to fine companies in violation of them as well as a study on payment stablecoins two years after the laws enactment.

In a joint statement issued Tuesday evening, the American Bankers Association, Bank Policy Institute, and the Independent Community Bankers Association called for policy that “can and must embrace financial innovation without undermining safety and soundness, and without putting the bank deposits that fuel local lending and drive economic activity at risk.”

Summer Mersinger, CEO of the crypto advocacy group Blockchain Association, issued a statement following the meeting, saying, “We’re encouraged by the progress being made as stakeholders remain constructively engaged on resolving outstanding issues.”

Ji Hun Kim, CEO for the Crypto Council for Innovation, another crypto advocacy group, also described the meeting as “constructive.”

For banks, the payment on stablecoin balances represents an existential threat to the industry’s deposits that could hit midsize and community banks hardest, crimping their ability to lend to Main Street.

And the clash is far from the only crypto issue the banking industry has raised in recent months. Trump administration regulators are trying to make it easier for the crypto world to apply for banking charters and accounts within the Federal Reserve payment system.

For crypto, the move is seen as a crucial lever to drive adoption of one of the crypto world’s most popular products: dollar-pegged stablecoins. And pressure to resolve the matter isn’t just coming from the White House crypto council, either.

“For crypto to remain a viable digital asset and move forward, we need to get this Clarity Act done,” Treasury Secretary Scott Bessent told Fox Business Network’s Maria Bartiromo on Sunday.

The Senate Banking Committee’s markup hearing for the stalled bill has been postponed twice since the beginning of January, with the most recent delay coming hours after Coinbase CEO Brian Armstrong rejected the bill’s latest draft due to key compromises.

“We got a few recalcitrant actors who said, ‘Well, it would be better to have no legislation than the legislation we don’t want,’ and I think both on the banks, the other crypto firms are united against them,” Bessent added.

David Hollerith covers the financial sector, ranging from the country’s biggest banks to regional lenders, private equity firms, and the cryptocurrency space.

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