US Senate Tilts Playing Field Toward Banks As Crypto Bill Curbs Passive Stablecoin Yields

After months of intense bipartisan negotiations, the full text of the Senate’s 278-page virtual asset market structure bill has been released. It marks a critical turning point for US crypto regulation.

While headlines have largely focused on its DeFi provisions and the classification of tokens, a more subtle shift may have gone unnoticed.

US Senate Crypto Bill Restricts Stablecoin Yields, Favors Banks in 278-Page Draft

The bill could tilt the competitive playing field in favor of traditional banks by restricting passive stablecoin yields.

The latest draft specifies that companies cannot pay interest solely for holding stablecoin balances. Instead, rewards are permitted only when tied to active account usage. This means:

• Staking
• Liquidity provision
• Transactions
• Posting collateral, or
• Participating in network governance.

In practical terms, retail users who previously earned passive yields similar to those of bank deposits may now face barriers. Meanwhile, banks retain their traditional ability to pay interest on deposits.

“Banks may have won this round on stablecoin yield,” noted Eleanor Terrett, host of Crypto in America, highlighting the provision on page 189 of the draft.

The timing adds urgency. Senators have just 48 hours to propose amendments before Thursday’s markup, leaving the final form uncertain.

If the provision remains unchanged, it could limit the appeal of crypto platforms to retail investors while nudging them toward DeFi activities or bank alternatives.

In simple terms, this approach risks stifling innovation without addressing systemic issues such as past stablecoin depegs that originally motivated yield offerings.

Token Clarity and DeFi Guardrails: How the Bill Balances Innovation and Oversight

Beyond yield rules, the bill addresses broader market structure, token classification, and DeFi oversight. Notably, it treats tokens like XRP, SOL, LTC, HBAR, DOGE, and LINK on par with BTC and ETH under ETF classifications, potentially reducing compliance burdens for large crypto firms while providing clarity for investors.

The legislation also incorporates compromise language that protects software developers and mitigates regulatory arbitrage concerns between DeFi and TradFi, a sticking point that had previously frustrated industry and banking stakeholders alike.

DeFi protocols, as outlined in the draft notes, must operate within defined boundaries to prevent loopholes that could undermine securities and commodities laws. At the same time, non-controlling developers are shielded from undue liability.

Senator Cynthia Lummis, a leading advocate for cryptocurrency, framed the release as a major milestone.

“The Digital Asset Market Clarity Act will provide the clarity needed to keep innovation in the US & protect consumers,” she said, urging her colleagues not to retreat from bipartisan progress ahead of the Banking Committee markup.

The bill, building on prior efforts such as the Lummis-Gillibrand framework, represents more than a regulatory roadmap. It may quietly recalibrate the US crypto ecosystem.

By limiting passive stablecoin yields, the draft subtly preserves the traditional banking model while simultaneously encouraging more active engagement in DeFi and network governance.

This trade-off could shape the behavior of retail users and the competitive dynamics between crypto platforms and banks moving forward.