Crypto execs ask Congress to let stablecoins pay interest as bill set to advance
That lobbying effort has been met with mixed reactions from lawmakers, and has also raised concerns from financial industry watchdogs who warn yield-bearing stablecoins could encourage consumers to move deposits into uninsured crypto accounts and out of the regulated banking system.
Stablecoins, a type of cryptocurrency designed to maintain a constant value, usually a 1:1 dollar peg, are commonly used by crypto traders to move funds between tokens. Their use has grown rapidly in recent years, and proponents say that they could be used to send payments instantly.
But some crypto executives and lawmakers are divided as to whether stablecoins should be treated as equivalent to cash, or if they are more like deposits at banks and should be able to earn interest.
"The government shouldn't put its thumb on the scale to benefit one industry over another," said Coinbase CEO Brian Armstrong in a post on X this week. "Banks and crypto companies alike should both be allowed to, and incentivized to, share interest with consumers."
Stablecoin issuers like Tether and Circle hold U.S. Treasuries and other cash equivalents to maintain a peg to the U.S. dollar. Those firms earn yield on those assets, but don't currently pass that on to token holders.
"Issuers already hold the assets. There's some yield on them, so it will make sense to allow them to also share that with the depositors," said Chen Arad, co-founder of Solidus Labs, a crypto compliance company.
The push is coming to a head as Congress appears likely to pass a bill creating stablecoin rules for the first time.
The House of Representatives and the Senate have both introduced bills to create a regulatory regime for stablecoins. The Senate Banking Committee advanced one measure last month, and the House Financial Services Committee approved another Wednesday.
The House bill currently prohibits stablecoin issuers from paying interest. But the bill in the Senate is less specific, excluding interest on some types of stablecoins but not explicitly banning such a product.
'I don't view the same way I would view a bank account,' said Republican House Financial Services Committee Chairman French Hill on Monday. 'I hear the point of view, but I don't think that there's consensus.'
Dante Disparte, chief strategy officer and head of global policy at Circle, which issues the stablecoin USDC, said payment stablecoins are more akin to "regulated electronic money" than other financial products.
"Our operating model since the beginning has been that any interest-bearing features on fully reserved, regulated payment stablecoins is a secondary market innovation," he said, suggesting that paying interest should be up to the venue where stablecoins are purchased, instead of an issuer like Circle.
Still, several lawmakers remain flexible on allowing a provision in the final bill to allow for issuers to pay yield and proponents plan to keep pushing for it to be included in a final measure, according to a source familiar with the matter.
That has raised alarm bells for some, particularly given the crypto industry's growing influence in Washington. The sector spent more than $119 million backing pro-crypto congressional candidates in last year's elections.
Some experts warn opening the door to interest-paying crypto products could destabilize the banking system, as deposits provide critical funds to banks to engage in lending and other activities.
"This is an existential threat to the banking industry, as well as to the financial system writ large," said Arthur Wilmarth, a professor emeritus of law at George Washington University, adding that taxpayers could ultimately be on the hook.
President Donald Trump has sought to broadly overhaul U.S. cryptocurrency policies after courting cash from the industry during his presidential campaign.
Bo Hines, who leads Trump's Council of Advisers on Digital Assets, said last month that the White House wants a stablecoin bill passed before August. Hines did not comment on whether stablecoin issuers should be allowed to pay interest.
In a statement to the House Financial Services Committee, the American Bankers Association urged lawmakers against any provisions that would encourage money to be held in the form of stablecoins rather than bank deposits.
"This concept is not a mere competitive concern; rather it poses significant risk to the fundamental role banks play in credit intermediation," the group said.
If stablecoin issuers were permitted to pay interest, though, it could be positive for consumers, said Navin Gupta, CEO of blockchain analytics firm Crystal Intelligence.
"Would there be financial instability? Maybe, but would there be a movement towards a better instrument that today responds to the consumer needs? That answer would also be yes," he said.
(Reporting by Hannah Lang in New York Editing by Nick Zieminski)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Dubai Eye
4 hours ago
- Dubai Eye
US Senate passes Trump's tax-cut, spending bill; sends to House
The Republican-controlled US Senate passed President Donald Trump's tax and spending bill on Tuesday, signing off on a massive package that would enshrine many of his top domestic priorities into law while adding $3.3 trillion to the national debt. The bill now heads back to the House of Representatives for final approval. Trump has pushed lawmakers to get it to his desk to sign into law by the July 4 Independence Day holiday. Trump's Republicans have had to navigate a narrow path while shepherding the 940-page bill through a Congress that they control by the slimmest of margins. With Democrats lined up in opposition, Republicans have had only three votes to spare in both the House and Senate as they wrangled over specific tax breaks and healthcare policies that could reshape entire industries and leave millions of people uninsured. Yet they have managed to stay largely unified so far. Only three of the Senate's 53 Republicans joined with Democrats to vote against the package, which passed 51-50 after Vice President JD Vance cast the tie-breaking vote. The vote came after an all-night debate in which Republicans grappled with the bill's price tag and its impact on the US healthcare system. It was not immediately clear what changes had been made to the massive package to resolve those concerns. The vote in the House, where Republicans hold a 220-212 majority, is likely to be close as well. An initial version passed with only two votes to spare in May, and several Republicans in that chamber have said they do not support the version that has emerged from the Senate, which the nonpartisan Congressional Budget Office estimates will add $800 billion more to the national debt than the House version. The House Freedom Caucus, a group of hardline conservatives who repeatedly threatened to withhold their support for the tax bill, is pushing for deeper spending cuts to reduce its total price tag. "That's not fiscal responsibility. It's not what we agreed to," the group said on Monday. A group of more moderate House Republicans, especially those who represent lower-income areas, object to the steeper Medicaid cuts in the Senate's plan. 'I will not support a final bill that eliminates vital funding streams our hospitals rely on,' Representative David Valadao, a California Republican, said during the weekend debate. Still, House Republicans are likely to face enormous pressure to fall in line from Trump in the days to come. The bill would make permanent Trump's 2017 business and personal income tax cuts, which are due to expire at the end of this year, and dole out new tax breaks for tipped income, overtime and seniors that he promised during the 2024 election. It provides tens of billions of dollars for Trump's immigration crackdown and would repeal many of Democratic President Joe Biden's green-energy incentives. The bill would also tighten eligibility for food and health safety net programmes, which nonpartisan analysts say would effectively reduce income for poorer Americans who would have to pay for more of those costs. The CBO estimates the latest version of the bill would add $3.3 trillion to the $36.2 trillion debt pile. That increased debt effectively serves as a wealth transfer from younger to older Americans, nonpartisan analysts say, as it will slow economic growth, raise borrowing costs and crowd out other government spending in the decades to come. The bill also would raise the nation's borrowing limit by $5 trillion, postponing the prospect of a debt default this summer that would roil global markets. Republicans rejected the cost estimate generated by the CBO's long-standing methodology. Nonetheless, foreign bond investors see incentives to diversify out of US Treasuries as deficits deepen. Republicans say the bill will help families and small businesses and put benefit programmes like Medicaid on a more sustainable path, and they have broadly agreed on its main contours. But they have struggled to agree on the Medicaid funding mechanism and a tax break for state and local tax payments that is a top priority for a handful of House Republicans from high-tax states including New York, New Jersey and California. Others worry that a crackdown on a funding mechanism for the Medicaid health programme could lead to service cutbacks in rural areas. Some on the party's right flank, meanwhile, have pushed for deeper Medicare cuts to lessen its budgetary impact. Trump has singled out those Republican dissenters on his Truth Social network and excluded them from White House events, and few have been willing to defy him since he returned to office in January. Senator Thom Tillis of North Carolina, one of the three Republicans who voted against the bill, said on Sunday he would not run for re-election next year. Republican senators Susan Collins of Maine and Rand Paul of Kentucky also voted against the bill.
Khaleej Times
4 hours ago
- Khaleej Times
US Senate approves divisive Trump spending bill by narrow margin
The Republican-led US Senate approved President Donald Trump's mammoth domestic policy bill Tuesday by the narrowest of margins, despite misgivings over delivering deep welfare cuts and another $3 trillion in national debt. Republican leaders had struggled to corral support during a record 24-hour "vote-a-rama" amendment session on the Senate floor, as Democrats offered dozens of challenges to the most divisive aspects of the package. Senate Majority Leader John Thune was able to turn around two moderates considering siding with Democrats, to deliver a 50-50 vote, with Vice President JD Vance breaking the tie. The sprawling text now heads to the House of Representatives, where it faces unified Democratic opposition and multiple Republicans balking at slashed health care and food aid programs for poor Americans. Trump's bill proposes a $4.5 trillion extension of his first-term tax cuts, contentiously offset with $1.2 trillion in savings mainly targeting the Medicaid health insurance programme that will strip coverage from an estimated 12 million low-income and disabled Americans. It also rolls back billions of dollars in green energy tax credits while providing a $350 billion infusion for border security and Trump's mass migrant deportation program. The president made clear that the goal remains to get the bill through the House in the coming days and sign it into law by Friday's July 4 Independence Day holiday, although he acknowledged that the self-imposed deadline could slip. "It's going to get in, it's going to pass, and we're going to be very happy," he told reporters as arrived in Florida to view new migrant detention facilities. 'Bad legislation' Polls show the bill is among the most unpopular ever considered across multiple demographic, age and income groups, and Democrats hope to leverage public anger ahead of the 2026 midterm elections when they aim to retake the House. Backed by extensive independent analysis, they say the bill's tax cuts would disproportionately benefit the wealthy at the expense of social safety net programs for the poorest Americans. "It's bad legislation," Arizona Senator Mark Kelly told MSNBC. "If this passes, this is a political gift for Democrats." A handful of senators in the Republican majority had also threatened to upset the apple cart, echoing Democratic concerns that the bill would add more than $3.3 trillion to the nation's already yawning budget deficits over a decade. The most high-profile opposition has come from outside Congress, however, in the shape of tech billionaire and estranged former Trump aide Elon Musk, who balked at the bill's debt implications and stripping of clean energy subsidies. In a dramatic reignition of his feud with Trump, Musk vowed to launch a new political party to challenge lawmakers who campaigned on reduced federal spending only to vote for the bill. Musk — whose businesses include rocket company and government contractor SpaceX, which has about $22 billion in federal contracts — has been campaigning against the bill since quitting as a Trump advisor in May. A furious Trump on Tuesday said he would consider deporting Musk and ending federal funds for his companies. "Elon may get more subsidy than any human being in history, by far," Trump posted in a retort on social media, "and without subsidies, Elon would probably have to close up shop and head back home to South Africa." Focus on House Although the House of Representatives has already passed their own version of the bill, it will have to come back to the lower chamber for a final rubber stamp before it reaches Trump's desk. House Republicans were watching anxiously from the sidelines to see if their Senate colleagues would adopt changes that would be hard for Speaker Mike Johnson to sell to his lawmakers. Fiscal hawks in the lower chamber are furious at what they say is $651 billion of extra deficit spending in the Senate's tweaks. A House vote could come as early as Wednesday but even with full attendance, House Republicans can only afford to lose three votes. "We're going to pass this bill one way or the other," Johnson told reporters at the Capitol on Monday.
Zawya
8 hours ago
- Zawya
US Senate push to pass Trump's $3.3trln bill extends into second day
WASHINGTON - U.S. Senate Republicans sought to pass President Donald Trump's sweeping tax-cut and spending bill early on Tuesday morning, despite divisions within the party about its expected $3.3 trillion hit to the nation's debt pile. Senators voted in a marathon session known as a "vote-a-rama", featuring a series of amendments by Republicans and the minority Democrats, part of the arcane process Republicans are using to bypass Senate rules that normally require 60 of the chamber's 100 members to agree on legislation. In the predawn hours, the lawmakers voted 99-1 to strip out a 10-year federal moratorium on state regulation of artificial intelligence, which supporters had promoted as a way to free innovation from a panoply of differing requirements. Beginning early on Monday and running for roughly 19 hours, it was still unclear how long the voting would last. Republicans can afford to lose no more than three votes in either chamber to pass a bill the Democrats are united in opposition to. The nonpartisan Congressional Budget Office released its assessment on Sunday of the bill's hit to the $36.2 trillion U.S. debt pile. The Senate version is estimated to cost $3.3 trillion, $800 billion more than the version passed last month in the House of Representatives. Many Republicans dispute that claim, contending that extending existing policy will not add to the debt. Nonetheless, international bond investors see incentives to diversify out of the U.S. Treasury market. Democrats, meanwhile, hope the latest, eye-widening figure could stoke enough anxiety among fiscally minded conservatives to get them to buck their party, which controls both chambers of Congress. "This bill, as we have said for months, steals people's healthcare, jacks up their electricity bill to pay for tax breaks for billionaires," Democratic Senate Minority Leader Chuck Schumer said in a speech to the Senate. Senate Majority Leader John Thune countered that the tax cuts would help families and small businesses, as he defended spending reductions to social safety net programs. He said Medicaid was growing at an unsustainable rate and there were some improvements and reforms to make it more efficient. Trump wants the 940-page bill passed before the July 4 Independence Day holiday. BILL POLITICS Amendments proposed by Democratic senators, such as the proposed limiting cuts to Medicaid, were rejected by the Republican majority. Embedded in the Senate Republicans' bill are several hot-button political issues, including a prohibition of Medicaid funding for a list of almost 30 medical procedures related to gender transition, as well as an increase of immigration-related funding for criminal and gang checks for unaccompanied migrant children, including examinations of "gang-related tattoos" for children as young as 12 years old. Early on Tuesday, the Senate also adopted an amendment offered by Republican Senator Joni Ernst to prevent jobless millionaires from claiming unemployment compensation. Democrats and Republicans voted down an attempt by Republican Senator Susan Collins to cushion the impact of Medicaid cuts on rural health facilities by doubling federal support to $50 billion over five years and paying for the increase by raising the top federal tax rate. The measure still drew support from 18 Republicans. Some Republicans, including Senator Lisa Murkowski and Collins, backed a handful of Democratic amendments on social issues, including Medicaid. But the initiatives still failed. Elon Musk, formerly appointed by Trump to spearhead his government cost-cutting plan before the pair had a public falling-out in June over the budget bill, threatened on Monday to target Republicans ahead of the 2026 mid-term election. "Every member of Congress who campaigned on reducing government spending and then immediately voted for the biggest debt increase in history should hang their head in shame!," Musk posted on X. The U.S. Chamber of Commerce, which says the majority of its members are small businesses, backs the bill. However, John Arensmeyer, who represents more than 85,000 small enterprises at the Small Business Majority, cautioned that the business tax relief was currently skewed to the wealthiest, top 5% of small businesses. DEBT CEILING DEADLINE The Republican measure contains a $5 trillion debt ceiling increase - $1 trillion more than the House's bill - but failure to pass some version would present lawmakers with a serious deadline later this summer, when the Treasury Department could come close to exhausting its borrowing authority and thus risk a devastating default. The debt limit increase has caused Senator Rand Paul of Kentucky to come out in opposition to the bill, joining fellow Republican Thom Tillis, who decried its cuts to Medicaid and clean energy initiatives. According to the Congressional Budget Office, the Senate bill would result in about 11.8 million additional uninsured people, surpassing estimates for the House's version. If the Senate succeeds in passing the bill, it will then go to the House, where members are also divided, with some angry about its cost and others worried about cuts to the Medicaid program. The megabill would extend the 2017 tax cuts that were Trump's main legislative achievement during his first term as president, cut other taxes and boost spending on the military and border security. Senate Republicans, who reject the budget office's estimates on the cost of the legislation, are set on using an alternative calculation method that does not factor in costs from extending the 2017 tax cuts. Outside tax experts, like Andrew Lautz from the nonpartisan think tank Bipartisan Policy Center, call it a "magic trick". Using this calculation method, the Senate Republicans' budget bill appears to cost substantially less and seems to save $500 billion, according to the BPC analysis. (Writing by Richard Cowan and Costas Pitas; Editing by Michael Perry and Alex Richardson)
