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The US administration announced significant progress in the dispute over stablecoin rewards, which is closely related to cryptocurrency market regulation.
According to the White House, the disagreement between the parties regarding rewards associated with stablecoin usage has “narrowed significantly.”
Patrick Witt, Executive Director of the White House Crypto Council, told the Crypto In America team at the ETHDenver event that the gap between crypto companies and bank representatives has significantly narrowed following a closed-door meeting last week.
The biggest point of contention in the regulatory process is whether crypto firms can offer rewards tied to stablecoin usage. Banks argue that such rewards could trigger deposit outflows and pose a risk to the traditional financial system. Crypto companies, on the other hand, claim that overly restrictive rules would stifle innovation and give existing financial institutions an unfair advantage.
On the crypto side, representatives from Coinbase, Ripple, and venture capital giant Andreessen Horowitz attended the meeting. The Blockchain Association and the Crypto Council for Innovation also participated. On the banking side, industry organizations such as the American Bankers Association, the Bank Policy Institute, and the Independent Community Bankers of America were present.
The most notable outcome of the discussions was the effective abandonment of the long-standing cryptocurrency idea of offering returns on idle stablecoin balances. Instead, the debate narrowed to whether or not to offer rewards tied to specific activities, such as trading volume or network participation.
According to banking sources, the “anti-evasion” provisions in the draft text could authorize agencies such as the SEC, Treasury Department, and CFTC to enforce the ban on idle balance returns. Violations of this ban would carry fines of up to $500,000 per day.
Witt stated that they aim to resolve the dispute over stablecoin rewards by March 1st. He added that this timeline could be met if the parties continue negotiations in good faith.
If an agreement is reached, the previously postponed Senate Banking Committee hearing could be rescheduled. While the final timing will be determined by Committee Chairman Tim Scott, it is stated that the process could move quickly once the draft text is finalized.
Witt said that resolving the issue of stablecoin rewards could create a “domino effect” and significantly accelerate the process of market structure regulation.
