Senate Banking Committee's crypto market structure bill text sets up showdown over stablecoin rewards

Lawmakers and the crypto industry are sifting through pages and pages of bill text that seeks to regulate digital assets at large, with much of the focus being on the treatment of stablecoin rewards.

Late Monday, Senate Banking Committee Chair Tim Scott, R-S.C., released 278 pages of bill text that would divide oversight of digital assets between the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission. The proposal seeks to clarify which assets qualify as securities versus commodities and establishes new disclosure requirements.

When asked for a vibe check following the release of the latest bill text, one source familiar with the matter said it was a "very much heads down and working to read, review and respond." Amendments to the bill text are due by 5 p.m. on Tuesday.

One of the most contentious issues pits banks against the crypto industry over the treatment of stablecoin rewards. Banking groups have sharply criticized a stablecoin law known as GENIUS, which passed over the summer. While the law bars issuers from paying direct interest to stablecoin holders, it does not prohibit third-party platforms such as Coinbase from offering rewards.

Banking groups have warned that a lack of clear limits could draw deposits away and could hurt community banks. Meanwhile, some in the crypto industry say the issue had already been debated ahead of passing GENIUS and accuse banks of trying to curb competition.

The latest bill text would prohibit digital asset service providers from paying any form of interest or yield for users merely holding payment stablecoins. However, it carves out exceptions for activity-based rewards or incentives linked to actions such as making transactions, staking, providing liquidity, or posting collateral.

It seemed to reflect a compromise made by Sen. Angela Alsobrooks, D-Md., last week, but a person familiar with the negotiation said the current bill text is not lined up with Alsobrooks and Democrats' compromise.

Alsobrooks' proposal says that a crypto exchange can offer yield on stablecoins if the customer takes certain actions, like selling their stablecoins. However, yield cannot be earned if the stablecoin is just sitting in the customer's account.

"The current bill text is not fully representative of the yield proposal put forth by Alsobrooks and Democrats, as it allows for many exemptions and does not provide an actual prohibition," the person said. "The Senator will continue to work in good faith with her colleagues to get the language to a workable place that can pass on a bipartisan basis."

However, the bill text on the treatment of stablecoin rewards may not be final.

Amendments and pushback

An amendment will likely be filed that is more restrictive than the language currently in the bill text that would significantly limit stablecoin rewards, one source said. That amendment potentially has the necessary votes to be included in the bill passed out of the Senate Banking Committee, the source said.

Meanwhile, Blockchain Association CEO Summer Mersinger accused "big banks" of acting in bad faith.

"The digital asset industry is at the table and negotiating in good faith," she said in a statement on Tuesday. "The Big Banks are not. If they succeed in blowing up this legislation with unreasonable demands, they will be left with language in the GENIUS Act – a status quo that they themselves have insisted is completely unworkable.

"That outcome would be self-inflicted, and it would expose exactly who is fighting for consumers and who is fighting to preserve monopoly power," Mersinger added.

The American Bankers Association, which has been following negotiations, did not respond to a request for comment.

Ethics questions and next steps

Another unresolved issue that did not seem to be addressed in the latest bill text is around concerns about President Donald Trump and his family's crypto ventures. Bloomberg has estimated over the past year that Trump has raked in over $600 million from his crypto ventures, including from DeFi and stablecoin project World Liberty Financial. The Trump family also holds a 20% stake in the mining firm American Bitcoin.

Key Democratic senators have said ethics language is essential in passing the bill and have called it a "red line," according to reporting from Punchbowl News.

This week, Patrick Witt, executive director of the President's Council of Advisors for Digital Assets, told Crypto In America that a deal with Democrats over ethics has not been reached.

"We've made clear to Democrats throughout this is [that] we're not going to tolerate targeting the president, targeting his family members and putting provisions in there that quite likely might be unconstitutional," Witt said.

As of Tuesday evening, significant issues are still at the forefront, but Democrats are in agreement that legislation needs to be done, just not "rushed through on an arbitrary timeline," an aide whose boss is in the talks told The Block. 

"There are still roughly a half-dozen significant issues outstanding – many of which are well-known, including yield, ethics, and ensuring decisions are made by fully constituted regulatory commissions, among others – and until those are resolved, Democrats will not be in a position to support moving forward," the aide said. "Conversations are ongoing, constructive, and focused on closing those gaps.”

The Senate Banking Committee will hold its markup on Thursday to amend and vote on the bill. Another key piece will be how the Senate Agriculture Committee, which has jurisdiction over the CFTC, plans to move forward. That committee just postponed its hearing from Thursday to later in January.

The two committee versions would then need to be reconciled before the bill can advance to the Senate floor. Democratic buy-in remains critical, as most legislation requires 60 votes to clear the chamber.

Updated at 7 p.m. UTC to clarify which groups are involved in negotiations

Updated at 10:30 p.m. UTC to add additional comments