Banks Take Hard Line on Stablecoin Yields as White House Talks Stall

Crypto and banks are arguing over stablecoin rewards, with no agreement reached before the March 1 deadline.

Banks and crypto executives met again at the White House this week to resolve the dispute over stablecoin rewards, but the talks ended without an agreement ahead of the March 1 deadline set by the administration.

The stance centers on whether crypto firms can offer yields on dollar-pegged tokens without taking out traditional bank deposits.

White House Talks Small Gaps But Yield Ban Remains Sticky Point

Details from the closed-door meeting were first shared with X by reporter Eleanor Terrett, who cited banking and crypto sources in the room. According to him, the participants described the session as “productive,” although no consensus was reached.

He added that banking groups come with a written set of “prohibition of yield and interest.” The document argued that payment stablecoins, as defined in the GENIUS Act, are strictly designed as payment instruments, not interest-bearing products. It also called for a broad ban on “any form of financial or non-financial consideration” related to holding or using the stablecoin for payment.

The handout only allows for very limited exemptions and warns of deposit flight that could reduce credit availability to communities. It also proposed civil penalties for violations and stricter rules against marketing stablecoins as deposits or FDIC-insured products.

Another bank contract, according to Terrett’s sources, was the inclusion of language allowing for “any proposed release,” a change from the previous refusal to discuss recording at all.

However, the scope of permissible activities is still controversial, with crypto companies seeking broad definitions that would allow platforms to reward users under certain circumstances, while banks want those definitions to be drawn narrower.

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The meeting was chaired by Patrick Witt, executive director of the President’s Crypto Council. Attendees included Coinbase Chief Legal Officer Paul Grewal, Stuart Alderoty of Ripple, Miles Jennings of a16z, and representatives from Paxos and the Blockchain Association.

Major banks in attendance included JPMorgan, Goldman Sachs, Bank of America, Citi, Wells Fargo, PNC, and US Bank, as well as trade groups such as the American Bankers Association.

Alderoty later wrote in X that “compromise is in the air,” though others described the outcome as undecided. More talks are expected in the coming days, although it is unclear whether another White House meeting will take place before the deadline.

Deposit Fears Shaping Broad Legal Fight

The yield debate unfolds against a broader push to pass a long-term crypto market structure bill. In the past week, crypto firms have floated agreements, including sharing stablecoin reserves with public banks or allowing them to issue their own tokens, in an effort to reduce opposition.

However, banks argue that yield-generating stablecoins could siphon funds from checking and savings accounts, weakening a key source of lending. Analyst Geoff Kendrick has warned that stablecoins could draw up to $500 billion from banks in industrialized countries by 2028.