Senate Unveils Updated Market Structure Bill Limiting Stablecoin Rewards on Idle Holdings

The U.S. Senate Banking Committee has released an updated draft of the crypto market structure bill, introducing new language that would limit rewards on idle stablecoin balances. The legislation, led by Chairman Tim Scott, aims to address growing tensions between traditional banks and digital asset platforms over incentives tied to stablecoin holdings according to reports.

The bill prohibits digital asset service providers from offering interest or yield for users simply holding stablecoins. However, it permits activity-based rewards, such as those linked to transactions, staking, or liquidity provision. The language reflects a compromise between crypto industry players and banking groups, which fear that stablecoin incentives could siphon deposits from traditional financial institutions as reported.

Coinbase, a major crypto exchange, has warned that it may withdraw support from the bill if restrictions on stablecoin rewards are finalized. The firm earns significant revenue from stablecoin-related activities, including interest on USDC reserves. In 2025, Coinbase reported stablecoin-related earnings of around $1.3 billion, making such rewards a key component of its business model.

Why Did This Happen?

Stablecoin rewards have emerged as one of the most contentious issues in the broader market structure debate. The banking industry has raised concerns that these incentives could undermine traditional lending and weaken community banks. The American Bankers Association has urged lawmakers to close perceived loopholes in the GENIUS Act, which currently allows third-party platforms like Coinbase to offer stablecoin-based rewards according to analysis.

Crypto firms, on the other hand, argue that such restrictions could stifle innovation and competition. They maintain that the regulatory framework established by the GENIUS Act was a reasonable compromise and warn that additional constraints may weaken the U.S. dollar's global position. Coinbase has also highlighted the risk of creating an environment where China could gain a competitive edge in digital currency innovation as stated.

How Did Markets React?

The evolving regulatory landscape has prompted uncertainty in the crypto market. Analysts suggest that the outcome of the market structure bill will significantly impact the future of stablecoin usage and platform-based incentives. Bloomberg Intelligence analyst Nathan Dean noted that the bill's success is contingent on maintaining bipartisan support, which has been under pressure due to the stablecoin debate according to analysis.

The Senate Banking Committee has scheduled a markup for January 15, 2026, to move the bill forward. The Agriculture Committee has also released its version of the legislation, with a markup expected at the end of the month. The path to finalizing a unified bill remains complex, as both committees will need to reconcile their proposals before moving to a full Senate vote as reported.

What Are Analysts Watching Next?

Market observers are closely tracking the Senate's ability to balance regulatory oversight with innovation incentives. The bill's final language will determine whether crypto platforms can continue to offer stablecoin rewards without banking licenses. Some analysts warn that delays caused by mid-term election politics could push the legislation into 2027 according to analysis.

Investor sentiment is also influenced by the broader debate over which regulatory body — the SEC or CFTC — will oversee digital assets. The House previously passed its version of the bill, which favors the CFTC. The final legislation may need to bridge these differences, adding another layer of complexity to the process as noted.