Senate likely to delay crypto markup over stablecoin rewards

Sen. Thom Tillis told reporters he does not expect the Senate Banking Committee to hold a markup on the crypto market-structure bill in April and suggested the panel aim for May while negotiators continue work on stablecoin rewards language.

The dispute centers on whether stablecoin issuers or outside platforms may pay interest or rewards to holders. A previously approved framework bars issuers from paying interest directly to holders but permits third-party platforms, such as exchanges, to offer rewards.

Bank trade groups say allowing such rewards could draw deposits away from traditional banks and weaken community institutions. Crypto firms counter that strict limits on third-party rewards would constrain development of payments and lending products.

A person familiar with the negotiations described the current draft as largely mirroring earlier language that would ban rewards on idle stablecoin balances held in accounts while allowing yield tied to transactional activity. Banking associations have been raising objections with other senators on the committee.

For the measure to become law it must be marked up and voted on in the Banking Committee, combined with the Senate Agriculture Committee version, pass the full Senate and then be reconciled with the House. The House passed a version nearly a year ago; the Agriculture Committee advanced its package earlier this year on party-line votes.

Supporters had pushed for an April markup. Sen. Cynthia Lummis told a conference the committee was eyeing April, and Sen. Bernie Moreno warned that if the bill did not clear Congress by May, “digital asset legislation will not pass for the foreseeable future.”

This week the committee schedule shifts attention to a confirmation hearing for the president's nominee to lead the Federal Reserve, which compresses the calendar available for a crypto markup. Tillis urged Committee Chair Tim Scott to target May for moving the bill forward.

Industry groups have lobbied committee leaders. Cody Carbone, chief executive of the Digital Chamber, wrote to Chair Scott and Sen. Elizabeth Warren asking them to advance “digital asset market structure legislation to a markup as soon as the calendar allows,” and said moving the bill would provide clarity for more than 70 million Americans who use digital assets.

Banking groups have focused outreach on the risk that stablecoin rewards could become a source of deposit competition. Crypto companies have argued that limiting third-party rewards would reduce consumer choice and slow development of new payment use cases. Negotiators describe the rewards question as the main sticking point holding up a committee markup.

Spokespeople for Chair Scott, Sen. Angela Alsobrooks and Sen. Tillis did not immediately provide comments. Negotiators are preparing further discussions before formally amending the bill and bringing it to a committee vote.