Traditional financial institutions have scored a major legislative victory following the inclusion of a critical provision in the latest draft of the proposed crypto asset and stablecoin regulatory framework. The provision explicitly bans stablecoin issuers and custodians from offering or paying interest or yield to holders of US dollar-pegged stablecoins.
The measure, widely seen as a result of heavy lobbying by the banking industry, addresses a key fear among traditional lenders: the flight of deposits to high-yield crypto platforms. Banks have long argued that decentralized finance (DeFi) platforms and centralized exchanges offering substantial annual percentage yields (APYs) on stablecoins represented unfair competition and posed systemic risks due to the lack of deposit insurance and strict regulatory oversight.
By barring interest payments, the proposed bill effectively neutralizes one of the most significant competitive advantages crypto firms held over traditional savings accounts. This move is expected to safeguard the existing deposit base of licensed banks, confirming their role as the exclusive providers of interest-bearing, insured accounts.
While banking advocates hail the move as necessary for financial stability, crypto industry participants warn that the provision stifles innovation and is disproportionately protective of incumbents. Critics suggest that the ban will simply drive sophisticated investors and yield-seeking capital toward offshore, unregulated platforms, defeating the bill’s stated purpose of bringing stablecoin activity within the regulated US perimeter. The success of this clause highlights the deep tension between established financial players and the nascent digital asset economy as Congress seeks to finalize comprehensive crypto legislation.
Source: Banks Win Key Battle as Crypto Bill Bars Stablecoin Interest Payments
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