The Clash Over Yield-Bearing Stablecoins in Washington
The confrontation between Wall Street and the cryptocurrency sector regarding yield-bearing stablecoins is escalating in Washington.
According to Will Beeson, founder and CEO of RWA liquidity layer Multiliquid and Uniform Labs, as well as the former head of tokenized asset infrastructure at Standard Chartered, the stablecoin industry requires more options to provide yield to its users.
“In a competitive market where others are launching their own stablecoins, you find yourself needing to incentivize users to choose your stablecoin,” Beeson shared. “Being able to offer yield would be a significant way to achieve that.”
Beeson made these remarks as the federal government starts to implement the GENIUS Act, legislation that President Donald Trump signed in July, which aims to establish the first formal U.S. framework for stablecoin issuance and trading. While this law prohibits issuers from paying yield, it does not stop third parties, such as exchanges, from providing interest or rewards on stablecoin holdings.
For example, the crypto exchange Coinbase offers interest on USDC balances maintained on its platform using Circle’s stablecoin USDC, thus effectively providing yield through a third-party intermediary.
“What the GENIUS Act forbids is for stablecoin issuers to pay interest or yield directly to holders,” Beeson clarified. “The legislation does not prevent intermediaries or third parties from providing incentives.”
This discrepancy has become the core of a lobbying confrontation. “From what I understand, it relates to requests from the banking lobby concerning the structure of the regulation, along with apprehensions that yield-bearing stablecoins could serve as a more appealing savings vehicle compared to lower-yielding bank deposits,” Beeson noted.
Banks have urged Congress to completely shut this door. In a letter dated August 12, the Bank Policy Institute and four other significant trade associations cautioned lawmakers that allowing the so-called loophole to remain could siphon up to $6.6 trillion from the U.S. deposit system.
“Without a clear prohibition that applies to exchanges, which act as distribution channels for stablecoin issuers or their business affiliates, the mandates set forth in the GENIUS Act can be easily bypassed and undermined by permitting interest payments indirectly to holders of stablecoins,” they stated.
“The outcome will be an increased risk of deposit flight, particularly during periods of economic distress, which would negatively impact credit creation throughout the economy,” the BPI’s letter argued, adding that this reduction in credit supply could lead to “higher interest rates, fewer loans, and increased expenses for Main Street businesses and households.”
In response, crypto organizations have pushed back. On August 20, the Blockchain Association and the Crypto Council for Innovation sent their own letter urging regulators to resist the pressure from banks and contesting the $6.6 trillion figure. “This claim does not hold up to scrutiny,” the letter stated.
They cautioned that cutting off yield would hinder innovation and put U.S. firms at a disadvantage on the global stage. “Permitting responsible, well-regulated platforms to share advantages with customers is not a loophole – it is a feature that encourages financial inclusion, stimulates innovation, and secures American leadership in the forthcoming generation of payment systems,” they remarked.
Nonetheless, Beeson advised that expectations for a near-term amendment to the law should be moderated. “Realistically, I would say it’s less than a fifty percent chance,” he said, attributing this to the legislative gridlock in Washington.
