Key Takeaways
- Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks have reached a preliminary compromise on stablecoin yield provisions within the Digital Asset Market Clarity Act.
- The proposed agreement would prohibit interest payments on passive stablecoin holdings, alleviating traditional banking sector concerns regarding deposit migration.
- Crypto industry participants are aware of the compromise but haven’t reviewed the actual legislative language, which wasn’t scheduled for distribution until Monday at the earliest.
- The White House examined revised legislation on Thursday; no official comment was provided regarding Friday’s development.
- The Senate Banking Committee plans a hearing for late April, with supporters targeting final passage by May.
A tentative bipartisan agreement between two U.S. senators has resolved a major obstacle in the Digital Asset Market Clarity Act, potentially accelerating the cryptocurrency legislation toward a Senate floor vote.
Senators Thom Tillis, a Republican, and Angela Alsobrooks, a Democrat—both serving on the Senate Banking Committee—announced they’ve achieved a preliminary understanding regarding stablecoin yield regulations. Politico first broke the story on Friday.
The compromise addresses whether issuers of stablecoins can distribute interest-type earnings to token holders. According to the tentative framework, providing yield on passive stablecoin holdings would be banned.
Speaking with Politico, Alsobrooks stated: “We’ve come a long way. And I think what it will do is to allow us to protect innovation, but also gives us the opportunity to prevent widespread deposit flight.”
Connor Lounsbury, her communications director, informed CoinDesk that both senators intend to seek input from industry participants before finalizing any terms.
Banking Industry Concerns Explained
Traditional financial institutions expressed worries that interest-bearing stablecoins would function similarly to bank deposits while offering superior returns, diverting funds from conventional banking channels.
Present bank deposit rates remain under 1%. A properly regulated stablecoin delivering competitive yields could draw customers away from standard accounts, undermining the deposit base that banks depend on for their lending operations.
Patrick Witt, who serves as executive director of the White House Council of Advisors for Digital Assets, challenged these concerns, arguing that legalizing and regulating dollar-backed yield-generating stablecoins would likely inject substantial new capital into U.S. banking institutions.
The Clarity Act experienced delays in January after prominent stakeholders, including cryptocurrency platform Coinbase, voiced objections to the stablecoin yield provisions. This interruption slowed momentum that had built following the adoption of the GENIUS stablecoin framework.
Outstanding Issues Remain
The yield-related compromise doesn’t eliminate all unresolved matters in the proposed legislation.
Lounsbury indicated that ethics requirements and anti-money laundering regulations require further negotiation before the bill can secure broad bipartisan support from the Banking Committee.
Certain Democratic lawmakers have additionally expressed concerns about the legislation’s approach to decentralized finance, or DeFi, referencing potential illicit finance vulnerabilities.
Senator Cynthia Lummis, who leads the Banking Committee’s digital assets subcommittee, indicated earlier this week that she anticipates a hearing during the latter portion of April.
A representative for Lummis informed Cointelegraph on Wednesday that a complete agreement was anticipated “in the next few days,” noting that Lummis was working to complete ethics-related provisions.
Proponents have been targeting a May timeline for resolution. Nevertheless, Senate scheduling faces pressure from competing legislative priorities, including a Republican-sponsored voter identification measure and discussions surrounding the conflict in Iran.
Cryptocurrency sector sources confirmed to CoinDesk their awareness of the new arrangement but noted they haven’t examined the actual legislative text, which wasn’t anticipated to reach stakeholders before Monday.
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