ABA CEO pushes Senate to tighten stablecoin reward limits before markup vote

Senate Stablecoin Legislation Faces Final Push on Reward Restrictions

The American Bankers Association CEO Rob Nichols sent a letter to bank executives on Sunday night urging them to contact their senators ahead of a key Senate Banking Committee vote, warning of an “urgent advocacy fight that requires your immediate engagement,” according to the article. The push comes as the Senate Banking Committee prepares for a markup hearing Thursday on sweeping cryptocurrency legislation that would establish a comprehensive federal regulatory structure for the industry.

Legislative Background and Previous Delays

The Senate Banking Committee had initially scheduled a markup in January but cancelled it at the eleventh hour after major crypto exchange Coinbase pulled its support over concerns including the treatment of stablecoin rewards. The current markup represents a second attempt to advance the legislation after months of negotiations among lawmakers, the White House, crypto executives, and bank trade groups.

Nichols’ Core Concerns

In his letter to bank CEOs, Nichols argued that the bill does not do enough to prevent crypto companies from offering “interest-like rewards” on stablecoins. “Without additional changes, we believe the current proposal would unnecessarily incentivize the flight of bank deposits into payment stablecoins, putting both economic growth and financial stability at risk,” Nichols said in the letter, adding that the ABA wants lawmakers to put crypto rules in place.

Banking groups have pushed back against the GENIUS bill, which was passed into law last year. That legislation blocks issuers from paying interest directly but leaves room for platforms like Coinbase to offer rewards. Bank industry groups argue such incentives could pull deposits away from traditional banks, particularly community institutions, while crypto firms counter that restricting rewards would hamper innovation.

The May 2 Compromise Language

After months of negotiations, key negotiators Sens. Angela Alsobrooks, D-Md., and Thom Tillis, R-N.C., came up with a compromise. On May 2, the senators released language that blocks “covered parties” from paying any form of interest or yield to U.S. customers solely for holding stablecoins, or in any manner “economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit.” That prohibition does not extend to “activity-based or transaction-based rewards and incentives” tied to bona fide activities.

That language garnered support from Coinbase, but bank industry groups have since pushed back and say it “falls short.” On May 8, a group of financial trade associations representing a variety of banks sent a letter to Senate Banking Committee Chair Tim Scott and top Democrat Elizabeth Warren asking for technical changes to stablecoin reward language. In the letter, they said the current language is not clear on whether certain activities would be allowed, such as paying a customer a flat amount every month for holding stablecoins that increases as the balance goes up.

“We are concerned, however, that the proposed language includes exceptions that will enable evasion of the intended prohibition and incentivize customers to hold and grow stablecoin balances at the expense of deposits,” the bank groups added, while also stating they agree with the premise that certain stablecoin activities can generate rewards and that interest-like payments will be blocked.

White House Response

The White House’s top crypto adviser, Patrick Witt, pushed back on Monday and said he had asked Nichols and other bank CEOs to attend meetings in February aimed at resolving the issue. “They refused,” Witt said in a post on X. “I guess the White House was beneath them?”

The article was updated at 3:35 p.m. UTC to include Witt’s comments.