Key Highlights
- Major U.S. banks presented formal principles seeking a ban on stablecoin yield to prevent deposit outflows.
- Crypto firms pushed for broader “permissible activities” that would allow stablecoin rewards under limited exemptions.
- The White House urged banks and crypto leaders to reach a stablecoin deal before the March 1 deadline.
A second, smaller White House meeting on stablecoin yield restrictions ended without a final agreement, even as banks and crypto executives moved closer to common ground on one of the most contentious issues in U.S. digital asset policy.
Details of the closed-door discussions were shared by journalist Eleanor Terrett on X, citing banking and crypto sources in the room. Participants on both sides described the talks as “productive,” though no compromise had been reached by the end of the session.
The White House has urged negotiators to strike a deal by March 1, raising pressure on both industries to resolve differences over whether payment stablecoins should be allowed to offer rewards.
At stake is a fundamental question for U.S. stablecoin regulation: Should dollar-backed payment stablecoins function purely as transactional instruments, or can they provide yield-like incentives that compete with traditional bank deposits?
Banks present a formal yield prohibition framework
Banking executives and industry trade groups arrived at the meeting with a written set of “Yield and Interest Prohibition Principles,” rooted in the GENIUS Act’s design of payment stablecoins as payment tools rather than savings products.
The framework proposes a sweeping restriction:
Prohibition on Stablecoin Yield: No person may provide any form of financial or non- financial consideration to a payment stablecoin holder in connection with the payment stablecoin holder’s purchase, use, ownership, possession, custody, holding, or retention of a payment stablecoin.
The document further states that: Any proposed exemptions from the prohibition must be extremely limited in scope so as not to undermine the prohibition and must not drive deposit flight that would undercut Main Street lending.
Bank representatives argue that allowing stablecoins to offer interest-like returns could accelerate deposit outflows from insured depository institutions, reducing credit availability for households and small businesses.
One source in the room pointed to what they described as a key concession from the banking side. The inclusion of the phrase “any proposed exemptions” marked a shift, as banks had previously been unwilling to discuss exemptions tied to transaction-based rewards at all.
The banking proposal also outlines strict enforcement and compliance mechanisms.
Enforcement: Regulators shall enforce provisions of this prohibition and have the authority to apply civil monetary penalties.
It also includes anti-evasion language to prevent circumvention and authorizes regulators to issue additional rules if needed.
The principles further restrict how stablecoin-related rewards may be marketed. Firms would be prohibited from describing any financial or non-financial consideration in ways that imply the stablecoin is a deposit, insured by the FDIC or NCUA, comparable to interest on an insured deposit, risk-free, or paid by someone other than the actual payer.
Regulators would be directed to issue rules ensuring accurate disclosure and preventing misleading representations.
Crypto pushes for broader “permissible activities”
The most heavily debated issue during the meeting centered on so-called “permissible activities,” which would determine what types of account behavior might allow crypto firms to offer certain rewards without violating a yield ban.
Crypto companies are pushing for broader definitions, arguing that transaction-based incentives and ecosystem rewards are not equivalent to traditional bank interest and are critical for innovation in digital payments.
Banks are seeking narrower definitions, concerned that overly broad exemptions could blur the line between payment instruments and deposit substitutes.
Stuart Alderoty, Chief Legal Officer at Ripple, said after the meeting that “compromise is in the air,” reflecting what several participants described as a more focused and substantive discussion than previous sessions.
Smaller meeting, higher stakes
The latest gathering was notably smaller than the first White House meeting on the issue, signaling a more targeted round of negotiations.
The session was led by Patrick Witt, Executive Director of the President’s Crypto Council, and included Senate Banking Committee staff.
On the crypto side, attendees included Paul Grewal of Coinbase, Miles Jennings of a16z, Stuart Alderoty of Ripple, Josh Rosner from Paxos, Summer Mersinger of the Blockchain Association, and Ji Kim of the Crypto Council.
Bank representatives included Goldman Sachs, JPMorgan, Bank of America, Wells Fargo, Citi, PNC, and U.S. Bank, along with trade groups such as the Bank Policy Institute, the American Bankers Association, and the Independent Community Bankers of America.
The White House has urged both sides to reach a deal by March 1, though it remains unclear whether another meeting of a similar scale will take place before the deadline.
Two-year study and future rule-making
The banking proposal also includes a longer-term regulatory safeguard. Two years after enactment, regulators would be required to submit a study to the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services examining payment stablecoin activity.
The study would assess financial and non-financial considerations paid to stablecoin holders and evaluate the impact on insured deposits, payment system efficiency, and credit access. If material risks are identified, regulators would be expected to propose additional rules in response.
A defining moment for U.S. stablecoin policy
The debate over stablecoin yield is emerging as a central fault line in broader crypto market structure legislation. For banks, the issue is deposit stability and the preservation of traditional lending capacity. For crypto firms, it is about competitive neutrality and the ability to design digital payment products that can scale.
While no agreement has been reached, participants described the latest session as more detailed and constructive than earlier discussions. With the March 1 deadline approaching, negotiators face a narrowing window to determine whether payment stablecoins in the United States will remain strictly transactional instruments or evolve into products that offer incentives resembling interest.
For now, the tone may be softening, but the policy divide remains unresolved.
Also Read: Zand Expands Ripple Partnership to Scale Global Stablecoin Adoption
