Author：The Block

Frustrations are continuing to boil over in the cryptocurrency industry as it finds itself again at an impasse over the treatment of stablecoin rewards.

Earlier this week, draft legislative language circulated around Capitol Hill in an effort to resolve negotiations over how to treat stablecoin rewards. At the time, a source familiar told The Block that it was more restrictive than hoped for.

Later, Punchbowl News reported that Coinbase expressed concerns and gave feedback to early drafts of the legislative text, which later drew backlash on X, accusing the giant crypto exchange of holding up a larger crypto market structure bill. That legislation, which was passed in the House last year, would regulate the industry as a whole, set clear parameters for which agency has jurisdiction, and also include disclosure requirements, among other rules.

The holdup

The issue around how to treat stablecoin rewards has been at a standstill over the past year.

That is the "main blocker" in passing broader crypto legislation, said Jason Somensatto, Coin Center's director of policy, in an interview with The Block. Once the stablecoin yield issue is resolved, there will likely be a "mad rush to resolve any other issues that might be out there before going to markup," he added.

The topic was addressed in the GENIUS stablecoin law, passed in July, which prohibits stablecoin issuers from paying interest directly to holders. However, the law does not stop third-party platforms, like Coinbase, from offering rewards. But banking industry advocates say that permitting such yields could siphon deposits away from traditional institutions, potentially harming community banks.

Crypto companies, though, have countered, saying that limiting rewards would hinder innovation.

The debate came to a crunch in January after Coinbase pulled its support for the crypto market structure bill less than a day before the Senate Banking Committee was slated to hold a hearing to amend and vote on its version of the bill. A bill needs to pass through the Senate Banking Committee and the Senate Agriculture Committee before going to a full Senate floor vote.

At the time, Coinbase CEO Brian Armstrong said he had concerns about the treatment of tokenized equities, DeFi issues, provisions that he said would "kill rewards on stablecoins," and the role of the Securities and Exchange Commission.

Since then, the White House has held three meetings between banks and the crypto industry to resolve the stablecoin issue, but has come up empty-handed.

"Coin Center doesn't have a position on yield," said Peter Van Valkenburgh, executive director at Coin Center. "So we're an outsider here. But what anyone can observe, if they're watching this closely, is that there'll be periods where the White House will announce that they're close to a deal, and then either the banks or Coinbase … will say 'no, this deal is terrible.'"

Other issues on hold

Meanwhile, stakeholders focused on other priorities — such as protections for software developers — are growing increasingly frustrated.

"It's like what the hell," Van Valkenburgh said. "Why have we gone through three or maybe four cycles of negotiations on this?"

"You've got to find a way forward because this could just die now," Peter added. "The longer this thing sits before a committee vote in banking, the greater the likelihood that it never gets a committee vote. Then there's no bill."

Some in crypto have raised frustrations about negotiations seeming stuck again.

On Thursday, in a post on X, Arca Chief Investment Officer Jeff Dorman accused Coinbase of "still holding the industry hostage."

Despite the criticism, Van Valkenburgh also voiced sympathy for Coinbase.

The stablecoin yield issue is not about the Clarity Act; it was addressed in GENIUS, and the banks should have negotiated language they didn't like about stablecoin yields then, he said.

"In that regard, I do have a lot of sympathy for Coinbase, and I'm frustrated with the banks," Van Valkenburgh said.

Coin Center is focused on the Blockchain Regulatory Certainty Act, which would clarify that non-custodial developers are not money transmitters. That bill was included in the House's version of the crypto market structure bill and would be within the Senate Banking Committee's jurisdiction.

"Our impression right now is that the BRCA is going to be a part of this bill," Somensatto said, adding that there are some who want to restrict protections.

Coinbase, meanwhile, remains optimistic that a bill could get across the finish line.

On Friday, in a post on X, Coinbase's Global Head of Investment Research David Duong said there is a plan to resolve the stablecoin yield language in the next three weeks.

"Crypto industry leaders are currently working on a coordinated counterproposal to explain why targeted changes are needed to protect customers and preserve sustainable rewards programs," Duong said.

Will a bill pass this year? 

Ultimately, the passage of a broad crypto market structure bill depends on whether negotiations around stablecoin yields can be resolved.

"The yield debate is really the hardest thing," said Van Valkenburgh. "Every time I see the two parties walk away from it without satisfaction, my odds go down."

For now, Congress is out for the next two weeks. Drafters of the bill may unveil more details in the meantime, Ron Hammond, head of policy and advocacy at Wintermute, told The Block.

"Likely we will see more news of the long-awaited markup in mid to late April," Hammond said. "It will also be telling to see where the bank lobby comes out on these yield provisions, as so far it has been relatively quiet from their side."