Financial institutions are preparing to mount a fresh campaign to prevent crypto platforms from distributing yields on stablecoin balances. However, Jaret Seiberg, a Washington analyst at TD Cowen, estimates the likelihood of Congress passing such a prohibition over the next two years at just 10%, according to a policy note issued Monday to clients and shared with Bitcoin Magazine.
The central question revolves around whether exchanges and related platforms are permitted to grant yields or rewards to investors holding dollar-pegged stablecoins. While Seiberg views legislative action as unlikely, he acknowledges a “narrow path” for a potential ban.
His perspective is grounded in procedural dynamics as well as politics: securing 60 Senate votes specifically for a stablecoin yield restriction might prove simpler than passing a comprehensive crypto market structure bill. That broader legislation failed a cloture vote 49-50 on September 15, and Seiberg previously deemed it effectively dead for the current Congress following the Democratic midterm sweep.
A ban would ultimately advantage traditional banks, prompting him to anticipate a renewed lobbying effort in the upcoming Congress under the assumption that Democratic victories create an opening.
Why Seiberg still sees a path
That potential route relies on an evolving landscape within the Senate. Several prominent crypto advocates have either retired or been defeated, while industry skeptics are ascending. Senator Elizabeth Warren is positioned to chair the Banking Committee, and Senator Sherrod Brown, a long-standing critic of the sector, retained his Ohio seat despite approximately $64 million in crypto-backed spending aimed at unseating him, as Seiberg noted ahead of the vote counts.
Still, this is not his primary projection. Because crypto politics remain “complex,” he noted, the starting probability is set at 10%.
Certain Democrats will push back against addressing stablecoin yield outside the context of a wider regulatory package. Seiberg reiterates that the Clarity Act lacks a viable path, contending that Democrats will demand ethics and investor-protection clauses that President Trump would reject. This division suggests Democrats are unlikely to consolidate support behind a bill focused exclusively on yields.
Furthermore, Democrats are not aligned on the underlying substance. Senator Angela Alsobrooks, a key Democratic figure in crypto policy, has supported granting rewards for utilizing stablecoins rather than for holding them passively—a distinction that shaped the Tillis-Alsobrooks compromise language during Clarity negotiations.
A public perception challenge also exists. Lawmakers would be asked to block everyday voters from generating returns on stablecoin assets, even though comparable returns are available through traditional savings accounts and money market funds. Seiberg questions whether Democratic leadership would welcome a vote that could easily be portrayed as stripping money away from retail investors.
What GENIUS already banned, and what it left open
This debate represents unfinished business stemming from the GENIUS Act, which President Trump enacted on July 18, 2025, as Public Law 119-27. The legislation explicitly forbids authorized and foreign payment stablecoin issuers from distributing “any form of interest or yield” strictly for holding, utilizing, or retaining payment stablecoins.
However, the statute does not explicitly address exchanges and other intermediaries, leaving what financial institutions label a loophole. Late last year, the American Bankers Association and various state banking associations urged lawmakers to classify platform rewards as prohibited interest. Subsequently, the ABA and the Independent Community Bankers of America (ICBA) pressured the Senate to strengthen Clarity provisions against balance- and tenure-based incentives. The ICBA has cautioned that yield-generating payment stablecoins could siphon deposits away from community banks and restrict local lending activity.
Because stablecoins function as the primary trading pairs for bitcoin across most exchanges, the yield dispute directly impacts how bitcoin markets settle and how platforms attract dollar reserves. Final GENIUS regulations issued by the OCC, which take effect in January 2027, deferred the matter of third-party rewards to case-by-case evaluations after banks had hoped the agency would resolve the issue outright.
Meanwhile, House Democrats are formulating their own market structure strategy that incorporates an expanded mandate for the SEC. Seiberg’s analysis highlights a narrow yield ban as the sole banking priority that might still achieve the 60-vote threshold even if the Clarity Act stalls.
The odds remain above zero, he explained, because community banks excel at demonstrating how stablecoin yields draw capital away from traditional institutions and impair local lending—an arena where smaller banks historically influence congressional action. Even so, he remains skeptical.
The ultimate test for the upcoming Congress will be whether banks can isolate the yield issue from the broader crypto debate, or if internal Democratic divisions and retail-investor sensitivities keep the probability right where Seiberg placed it on Monday: one in ten.
FAQ
What are the odds of a stablecoin yield ban?
TD Cowen analyst Jaret Seiberg gives Congress a 10% chance of enacting a stablecoin yield ban over the next two years.
Did the GENIUS Act ban stablecoin yields?
The GENIUS Act banned payment stablecoin issuers from paying interest or yield for holding tokens, but left out exchanges and intermediaries.
Why do banks want a stablecoin yield ban?
Banks argue that yield-bearing stablecoins draw deposits away from traditional community banks and reduce local lending.
What makes a stablecoin yield ban difficult to pass?
Challenges include potential optics of taking returns from retail investors, Democratic divisions, and resistance to passing a yield-only bill.
