Crypto Leaders Clash Over Proposed Stablecoin Yield Ban

• Draft bill bans stablecoin yield and interest-like rewards, allowing only activity-based incentives under rules.
• Crypto firms, VCs, and banks split over impact, debating innovation limits versus financial stability.
• Market reacts as Circle drops 20% and Coinbase falls 10% amid concerns over adoption and regulation.

A new U.S. legislative draft that would ban yield on passive stablecoin balances triggered sharp divisions across the crypto industry this week. The proposal, reviewed by select participants during meetings on Capitol Hill Monday, drew reactions from exchanges, venture firms, and banks. The debate intensified Tuesday, according to Crypto In America, as firms argued over its impact.

Draft Proposal Restricts Yield Offerings

The draft legislation would prohibit companies from offering yield on stablecoin holdings, both directly and indirectly. It also bars any mechanism considered economically similar to interest. However, the text allows activity-based rewards, including loyalty or promotional incentives.

According to attendees cited by Crypto In America, regulators would define acceptable rewards within one year. The language emerged after nearly two months of negotiations involving the White House and Senate Banking Committee members.

Notably, meetings on Monday followed a controlled format. Participants reviewed the text in short sessions and could not retain copies. This process limited broader industry access during early discussions.

Industry Reaction Splits Across Groups

Following the review, reactions quickly diverged among industry participants. One trade association described the language as restrictive and unexpected. Another group, however, said the proposal aligned with prior discussions and preserved reward programs.

Tensions escalated further during a Tuesday conference call. According to sources, discussions turned into a heated exchange between crypto firms and venture representatives. The disagreement centered on whether the framework balanced innovation with financial stability.

Meanwhile, banking representatives also reviewed the draft. One attendee said the language reflected a compromise shaped by lawmakers, including Senators Thom Tillis and Angela Alsobrooks.

Market Response And Broader Debate

Circle’s stock dropped about 20%, with analysts linking the decline to the yield restrictions. Coinbase shares also fell roughly 10% during Tuesday trading.

At the same time, social media discussions intensified criticism of the proposal. Many users argued the rules could affect adoption across the sector. The Senate Banking Committee has not yet released the full text publicly, although sources expect wider distribution soon.

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