U.S. Stablecoin Draft Bill Ignites Fight Over Limits on Yield

A U.S. legislative draft that would bar yield on passive stablecoin balances is widening rifts across the crypto ecosystem, pitting exchanges and venture investors against others who see the move as a financial-stability safeguard. The proposal, shown to a limited set of participants during closed-door meetings on Capitol Hill on Monday, would prohibit companies from offering yield on stablecoin holdings, whether directly or indirectly, and would also ban mechanisms deemed economically equivalent to interest. The text would still permit activity-based incentives such as loyalty and promotional rewards. People familiar with the discussions said regulators would have up to one year to define what qualifies as an acceptable reward. The language follows nearly two months of negotiations involving the White House and members of the Senate Banking Committee. Access to the draft was tightly controlled: participants reviewed the text in brief sessions and were not allowed to keep copies, restricting broader industry input at this stage. Industry response quickly split. One trade association characterized the language as unexpectedly restrictive, while another said it largely matched prior conversations and preserved reward programs. The dispute escalated on a Tuesday conference call, where sources described a heated exchange between crypto companies and venture representatives over whether the framework strikes the right balance between innovation and financial stability. Banking representatives also weighed in after reviewing the draft. One attendee said the text reflects a compromise shaped by lawmakers, including Senators Thom Tillis and Angela Alsobrooks. Markets reacted sharply. Circle shares fell about 20%, which analysts tied to concerns over the yield restrictions, while Coinbase dropped roughly 10% in Tuesday trading. Criticism also intensified on social media, with users arguing the rules could slow adoption across the sector. The Senate Banking Committee has not yet released the full draft publicly, though sources expect broader distribution soon.