Stablecoin Yield Farming Expected to Be Banned, Crypto Industry Makes Legislative Concessions

BlockBeats News, February 20th, according to crypto reporter Eleanor Terrett, this morning's "Cryptocurrency Market Structure Bill" (known as the CLARITY Act) stablecoin yield issue meeting was smaller in scale than last week, with attendees from Coinbase, Ripple, a16z, and the cryptocurrency industry association, and no bank representatives attending separately, with the banking sector's voice being conveyed through the industry association. This meeting had a noticeable difference: the White House led the discussion, rather than allowing cryptocurrency companies and banks to lead the discussion as in previous meetings.

White House Cryptocurrency Council Executive Director Patrick Witt brought a draft text to the forefront of the discussion. The text acknowledged the concerns raised by banks last week in the "Revenue and Interest Prohibition Principle" document, while making it clear that in stablecoin-related legislation, a key goal of the cryptocurrency industry, earning yield on idle stablecoin balances will be prohibited (Earning yield on idle balances is effectively off the table). The focus of the debate has narrowed down to whether cryptocurrency companies can offer stablecoin rewards tied to specific activities.

The banks' concerns appear to be more related to competitive pressure rather than the initially perceived concern of deposit outflows. Banking sources indicated that they are still pushing to include a deposit outflow study in the draft—a study that will examine the growth of stablecoin payments and their potential impact on bank deposits. In addition, the banking industry is encouraged by the proposed anti-tax evasion provision, which would empower the SEC, Treasury Department, and CFTC to enforce the ban on earning yield on idle balances and impose a civil fine of $500,000 per day for each violation.

Sources stated that a resolution by the end of the month is possible, with negotiations set to continue in the coming days.