The US Congress is closer than ever to defining federal rules for digital assets, but the question of whether stablecoins can deliver returns has slowed the process more than interagency battles or token classification.
Notably, the House has already advanced the Digital Asset Market Clarity Act, which outlines a path for certain tokens to move from securities regulation to CFTC supervision.
At the same time, the US Senate is working on a parallel package that divides responsibilities between the Agriculture Committee and the Banking Committee.
However, despite substantial areas of agreement, negotiators say the issue of stablecoin yield remains the sticking point.
This debate centers on whether payment stablecoins should be able to pass on some of the short-term government bond yields to users, either as explicit interest or as promotional rewards offered by affiliates.
Democratic lawmakers argue that yield-bearing structures can accelerate deposit outflows from community banks and raise funding costs. At the same time, Republicans argue that capping revenues would protect established institutions at the expense of consumers.
What started as a technical question about regulation has evolved into a broader discussion about the composition of the U.S. deposit base and the potential of digital dollars to compete with traditional bank accounts.
The $6.6 trillion outflow scenario
The conversation changed in mid-August after the Bank Policy Institute (BPI) highlighted what it described as a gap in the GENIUS Act, the stablecoin law passed earlier this year.
The statute prohibits issuers from paying interest, but does not explicitly prohibit exchanges or marketing partners from offering incentives tied to the issuer’s reserves.
According to BPI, this structure could allow stablecoin operators to earn cash equivalent returns without obtaining a bank charter.
To highlight these concerns, the group cited government and central bank scenario analyzes that estimate as much as $6.6 trillion in deposits could migrate to stablecoins under permissive yield designs.
Analysts familiar with the modeling emphasize that the figure reflects a stress scenario rather than a projection, and assumes high substitutability between traditional deposits and tokenized cash.
Still, the figure has shaped the debate. Senate aides say it has become a point of reference in discussions about whether reward programs constitute shadow deposit taking and whether Congress should adopt anti-evasion language covering affiliates, partners and synthetic structures.
The concern is based on recent experience. Deposit betas have remained low at many U.S. banks, with checking accounts often paying between 0.01% and 0.5%, despite Treasury yields being above 5% over the past year.
The gap reflects the economics of bank financing. Stablecoin operators holding reserves in short-term government bonds could theoretically offer significantly higher returns while providing near-instant liquidity.
Considering this, policymakers worry that this combination could divert money from lenders that support local credit markets.
A narrow legal question
The yield question centers on how Congress defines “interest,” “issuer,” and “affiliate.”
Under the GENIUS Act, issuers must maintain reserves and meet custody and disclosure standards, but cannot pay interest on tokens in circulation.
Legal analysts note that an exchange or related entity offering a rewards program could create a structure in which users receive value that is economically comparable to interest, while remaining outside the legal definition.
However, banking industry groups have urged lawmakers to make it clear that any return derived from reserves, whether distributed directly or through a separate entity, should be subject to the interest rate ban.
Meanwhile, crypto industry stakeholders argue that such restrictions would put stablecoins at a competitive disadvantage against fintechs, which already offer reward programs that approximate returns.
They also note that other jurisdictions, including the United Kingdom and the European Union, are creating routes for tokenized cash instruments with different approaches to reward.
For them, the policy question is how to support digital dollar innovation while maintaining prudential boundaries, not how to completely eliminate returns from the ecosystem.
However, Democrats counter that the pace of transfers through the chain creates a different dynamic than traditional competition between banks.
Stablecoin balances can move quickly across platforms without settlement delays, and reward structures tied to government bond income can accelerate flows during market stress. They cite research showing that crowding out deposits at community banks would have the biggest impact on lending to rural, small business and agricultural borrowers.
According to a recent Data for Progress poll, 65% of voters believe the widespread use of stablecoins could harm local economies, a view reflected across party lines.
Other issues slowing down the crypto account
Meanwhile, stablecoin yields aren’t the only unresolved issue.
Democrats have proposed adding ethics provisions that would limit public officials and their families from issuing or profiting from digital assets while in office, as well as requirements to retain full commissioners at the SEC and CFTC before delegating new supervisory authority.
They are also seeking clearer tools to address illicit financing for platforms that facilitate access for U.S. citizens, and a definition of decentralization that prevents entities from evading compliance obligations by labeling themselves as protocols.
These additions have reduced legislative leeway. Senate aides say an increase before the recess is now unlikely, raising the possibility that final negotiations could stretch into 2026.
In that case, the GENIUS Act’s ambiguity regarding compensation would persist, and the SEC and CFTC would continue to shape the digital asset market through enforcement actions and regulations.