The American Bankers Association at the last minute pressured Congress: warning that "yield terms" of stablecoins could trigger deposit outflow risks

Odaily Planet Daily News: On the eve of the U.S. Senate Banking Committee’s upcoming critical vote on comprehensive cryptocurrency legislation, the American Bankers Association (ABA) CEO Rob Nichols issued an urgent letter to banking executives, urging immediate contact with senators to pressure revisions to the stablecoin-related provisions.

Nichols warned that the current draft fails to effectively prevent crypto firms from attracting stablecoin deposits through “interest-like rewards,” which could lead to a large-scale transfer of deposits to stablecoins, threatening economic growth and financial stability. He stated in the letter that this is an “urgent advocacy battle that requires immediate action.”

The bill originally aimed to establish the first federal unified regulatory framework for the crypto industry and clarify the responsibilities of various regulatory agencies, but disputes over stablecoin yields have continued to be a core legislative obstacle. The banking industry worries that, although the related framework of the passed GENUIS Act last year prohibits issuers from directly paying interest, it still allows platforms to indirectly offer yields through reward mechanisms, thereby weakening the bank system’s capital base.

After multiple rounds of negotiations, bipartisan senators proposed a compromise: prohibit “regulated entities” from providing interest or equivalent yields to token holders in any form, but allow reward mechanisms based on trading or usage behavior. However, banking groups subsequently opposed this, arguing that the wording leaves “room for circumvention,” such as providing fixed rewards based on holding size, which could be viewed as disguised interest.

Currently, the Senate Banking Committee is expected to hold a review and vote on the bill this Thursday, with the regulatory boundaries of stablecoin yield mechanisms remaining one of the biggest points of contention. (The Block)