Banks Protest High-Yield Stablecoins as Crypto Regulation Debate Intensifies in Washington

According to ChainCatcher, as reported by the Wall Street Journal, the crypto industry and the banking sector are engaged in a fierce lobbying battle over digital tokens that offer annualized returns. This dispute could potentially derail legislative efforts originally aimed at integrating cryptocurrencies into the mainstream financial system. The core of the debate centers on the "rewards" offered by crypto companies—annualized returns distributed periodically to investors in proportion to their holdings. Such mechanisms are particularly common in stablecoins. From the banking industry's perspective, the practice of companies like Coinbase offering approximately 3.5% returns on stablecoins is essentially akin to high-yield deposits, yet it does not require compliance with the strict regulatory requirements that banks face when accepting public deposits. Banking organizations have therefore sent numerous letters to legislators, warning that these "yield-generating stablecoins" could have a devastating impact on small and medium-sized banks in the U.S. By contrast, the national average interest rate for standard interest-bearing checking accounts in the U.S. remains below 0.1%. This dispute is one of the reasons the Senate Banking Committee postponed its planned vote on a cryptocurrency market structure bill scheduled for Thursday. While JPMorgan Chase, Citigroup, and other major banks oppose stablecoin rewards, they are simultaneously developing their own cryptocurrency products and partnership plans. Some banks, including Bank of America, are considering whether to issue their own stablecoins. Analysts suggest that Coinbase's withdrawal of support for the bill could seriously jeopardize its prospects, although other crypto companies continue to express their support. This dispute highlights a growing tension: on one side, the rapidly expanding crypto industry in Washington, which is actively leveraging its growing lobbying influence; on the other, the traditional banking sector, which has maintained close relationships with Congress for decades. Last year, the U.S. Treasury estimated that stablecoins could potentially draw up to $6.6 trillion in deposits away from the U.S. banking system, partly due to the "yield" mechanisms they offer. By comparison, according to the latest data from the Federal Reserve, total deposits in U.S. commercial banks as of early January were approximately $18.7 trillion. The U.S. government insures deposits up to $250,000 per account, but at the same time, it imposes strict regulations on banks' operations and financial soundness.