The US government has recently reported notable advancements in resolving the dispute surrounding rewards linked to stablecoins, a key issue within cryptocurrency market regulation.
According to statements from the White House, the differences between involved parties over incentives related to stablecoin usage have considerably diminished.
Patrick Witt, Executive Director of the White House Crypto Council, shared with Crypto In America at ETHDenver that last week’s private meeting led to a substantial narrowing of disagreements between representatives from crypto firms and banking institutions.
The primary challenge in regulatory discussions centers on whether cryptocurrency companies should be permitted to offer rewards connected to stablecoin holdings. Banking officials express concerns that such incentives might cause deposit withdrawals and threaten traditional financial stability. Conversely, crypto advocates argue that excessive restrictions could hinder innovation and unfairly benefit established banks.
Participants representing the crypto industry included Coinbase, Ripple, and venture capital firm Andreessen Horowitz. Additionally, groups like the Blockchain Association and Crypto Council for Innovation were involved. On behalf of banks attended organizations such as the American Bankers Association, Bank Policy Institute, and Independent Community Bankers of America.
A significant development from these talks was moving away from allowing returns on idle stablecoin balances—a long-held concept in cryptocurrency circles. The focus shifted instead toward permitting rewards tied specifically to certain activities like trading volume or network engagement.
Banking insiders revealed that proposed “anti-evasion” clauses might empower regulators including the SEC, Treasury Department, and CFTC to enforce prohibitions against returns on inactive balances. Noncompliance could result in penalties reaching $500,000 per day.
Witt emphasized their goal is settling this matter by March 1st, contingent upon continued constructive negotiations among all parties involved.
If consensus is achieved, a previously delayed Senate Banking Committee hearing may be rescheduled promptly. While Committee Chairman Tim Scott will determine exact timing, progress is expected once final draft regulations are completed.
Resolving issues around stablecoin rewards could trigger a “domino effect,” Witt noted, paving way for faster implementation of broader market structure reforms.
This content does not constitute investment advice.