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Legislators must decide if America will spearhead the next generation of finance or remain a passive observer.
U.S. Capitol building in Washington (Jesse Hamilton/CoinDesk)
In Washington, the safest decision is frequently to abstain from voting, and the most favorable timeline is often deemed “next session.” However, regarding the future of banking, financial markets, and financial services, inaction is not an option. The United States requires clear regulations for cryptocurrency to effectively compete and thrive in the digitally interconnected financial landscape of the 21st Century.
The Senate is currently at a pivotal juncture concerning market structure legislation—policies aimed at establishing order in the realm of digital asset innovation, which is becoming an increasingly vital aspect of global finance. Neglecting to formalize the “rules of the road” not only hinders crypto development; it also invites regulatory disorder that adversely affects banks and consumers, diminishes economic vitality, and pushes innovation overseas. Congress must decide if America will take the lead in the next generation of finance or observe from the periphery.
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The ongoing deadlock revolves around a perceived conflict between banks and cryptocurrency platforms regarding interest yields and rewards on stablecoins—an issue that has already been addressed by the GENIUS Act, enacted by President Trump last year. This legislation allows crypto firms to provide rewards and incentives for customers who hold and utilize stablecoins from different providers. Banks argue that these reward structures closely mirror traditional bank savings and checking products and, if not regulated, could divert customer funds away from insured deposits without similar prudential measures.
When viewed in this manner, the dispute carries more significance than necessary. Yields and rewards are matters of design within a payments framework, rather than issues of systemic risk or financial stability. Treating them as threats to existence has postponed an otherwise simple resolution, stalling progress on critical market structure concerns.
By examining the situation beyond talking points, a viable compromise is already identifiable. Congress can explicitly authorize federally regulated banks—including community banks—to offer yields on payment stablecoins. This would provide banks with a clear, federally endorsed opportunity to generate revenue and attract customers in the stablecoin sector. They would gain a straightforward means to secure clients and funds, which is crucial for community banks aiming to compete with larger banks and expansive payment platforms. Simultaneously, crypto platforms would maintain the incentive structures their clients expect and that are permissible under current law. Congress would advance market structure legislation and create a bill capable of passing. Most importantly, American consumers would benefit from enhanced competition and the chance to participate in the yield potential of their funds.
Portraying cryptocurrency as a fundamental threat to community banks is more of a rhetorical strategy than an economic reality. Recent empirical analysis indicates no statistically significant correlation between stablecoin adoption and deposit outflows, implying that stablecoins primarily serve as transactional tools rather than substitutes for savings. Properly regulated stablecoins could, in fact, offer local and community banks a means to modernize their payment systems and reach new clientele.
The rewards-yield debate is a design concern that can be resolved without disrupting the progress that has already been made. A feasible compromise exists that aligns with banks’ economic interests, safeguards crypto innovation, and adheres to the established regulations of the GENIUS Act. Progressing on this foundation preserves the broader market structure package and delivers the legal clarity that the American economy requires.
The Senate is equipped to resolve this deadlock and to align with the strong leadership demonstrated by the White House. Failing to take action would be a choice, not a foregone conclusion.
