Crypto Firms Protest Regulatory Bill as Stablecoin Rewards Debate Intensifies

The ongoing debate over stablecoin regulation in the United States has intensified as a key Senate bill has been delayed, drawing opposition from major players like Coinbase. The legislation seeks to clarify regulatory oversight but faces resistance due to provisions that limit interest-bearing rewards on stablecoins. This delay highlights the growing divide between the crypto industry and traditional banking sectors, each arguing over the implications of stablecoin usage.

The Senate Banking Committee postponed its markup session on a proposed digital asset bill, following pushback from Coinbase and other crypto firms. The company has pulled its support for the latest version, citing concerns over restrictions on offering rewards on stablecoin holdings. This move reflects broader industry anxiety over potential limitations on a critical revenue stream and user engagement tool.

Stablecoins have become a significant part of the crypto ecosystem, particularly after the passage of a federal law in July that regulated their use. The industry now fears that the current regulatory impasse could hinder the U.S. from maintaining a competitive edge in the global digital asset market.

Why Did This Happen?

The proposed bill aims to delineate the roles of the CFTC and SEC in regulating digital assets. The CFTC would oversee decentralized assets, while the SEC would manage assets tied to central entities, albeit with simpler rules.

A central issue in the bill is the ban on interest on stablecoin holdings. This restriction is intended to prevent a mass shift of deposits from traditional banks to crypto platforms, a concern raised by major banking institutions.

Coinbase and other crypto companies argue that these restrictions are unfair and could force them to operate outside the U.S. They claim that stablecoin rewards are essential for retaining users and competing with traditional financial products.

How Markets Responded?

The market has shown mixed reactions to the bill delay and the ongoing debate. Bitcoin has shown signs of stabilization as institutional buying has increased, suggesting a potential for further growth in early 2026. However, the uncertainty surrounding the regulatory landscape continues to weigh on market sentiment.

Bank of America CEO Brian Moynihan has warned that interest-bearing stablecoins could siphon $6 trillion from traditional bank deposits, impacting small and medium-sized businesses that rely on bank lending. This concern has fueled support for the bill among banking groups, who argue that such a shift could undermine financial stability.

Conversely, crypto advocates, including the Blockchain Association and Stand With Crypto, have mobilized public support, sending thousands of messages to lawmakers urging them to protect stablecoin rewards.

What Are Analysts Watching Next?

Analysts are closely monitoring the Senate Banking Committee's markup session and the potential compromise on stablecoin rewards. A strict ban could delay the bill's passage until 2027 or 2029, given the political climate and upcoming midterm elections.

Coinbase has also applied for a national trust banking charter, which could provide a legal framework for offering rewards within U.S. regulations. However, a stricter bill could negate this strategy before it bears fruit.

The outcome of this legislative battle will have significant implications for both the crypto and banking industries. It could determine whether the U.S. remains a leader in digital asset innovation or cedes ground to other markets.

Investors and market participants are advised to monitor these developments, as they could affect regulatory clarity, investment strategies, and overall market stability in the coming months.