Crypto Firms Propose Key Stablecoin Concessions To Advance CLARITY Act – Report

Crypto firms are reportedly stepping up efforts to advance the highly anticipated market structure bill by proposing potential compromises to address some of the banking sector’s concerns on stablecoins.

The crypto bill has been stalled in the US Senate for weeks as crypto industry leaders and banks have been unable to reach an agreement on one of the bill’s main topics, stablecoin rewards, in the Senate Banking Committee’s portion of the legislation.

According to people familiar with the matter, industry participants are offering banks new concessions regarding these concerns, as part of their efforts to advance the long-awaited crypto legislation.

For instance, the firms have reportedly proposed giving community banks a larger role in the stablecoin system, allowing them to hold reserves or issue tokens through partnerships. Notably, they suggested requiring stablecoin issuers to maintain a portion of their reserves at community banks.

For context, the crypto framework prohibits interest payments on the holding or use of payment-purpose stablecoins but only addresses stablecoin issuers. As a result, banking associations across the US pressed the Senate Banking Committee to add language to the CLARITY Act that also bans digital asset exchanges, brokers, dealers, and related entities.

The Senate Banking Committee published its draft last month, which received heavy backlash from crypto industry leaders for introducing key restrictions for stablecoin issuers.

Under the proposed draft, issuers would be able to offer rewards for specific actions, such as account openings and cashback. Nonetheless, they would be prohibited from providing interest payments to passive token holders. Coinbase’s CEO Brian Armstrong argued that “would kill rewards on stablecoins,” and allow banks to “ban their competition.”

This led to a delay of the Senate Banking Committee’s markup session, initially scheduled for mid-January, and an extended negotiation process between lawmakers and leaders from the two industries.

The negotiation reportedly ended without an agreement on how to address the dispute but led to “constructive discussion on the risks and opportunities of stablecoin yield and rewards.”

Senate Banking Committee Chairman Senator Tim Scott recently affirmed that he is still hopeful the two sides can reach a balance. “We can protect consumers and community banks while still allowing innovation and competition to lower prices and expand access,” he stated. “Both sides are working toward a compromise that keeps innovation here in America.”