A draft U.S. bill that would bar yield on passive stablecoin balances has opened a sharp divide across the crypto sector. People who reviewed the text during Monday meetings on Capitol Hill said companies would be prohibited from offering returns on stablecoin holdings, whether directly or through structures considered economically similar to interest. The draft still leaves room for activity-based rewards, including loyalty programs and promotional incentives, but the exact limits would be defined later by regulators.
The language emerged after nearly two months of negotiations involving the White House and members of the Senate Banking Committee. According to attendees cited by Crypto In America, regulators would have one year to determine which reward structures are acceptable. Access to the proposal was tightly controlled on Monday: participants were allowed to review the text only in brief sessions and could not keep copies, restricting broader industry visibility at the early stage.
Dispute centers on where rewards end and interest begins
Reactions split quickly after the review. One trade association described the wording as more restrictive than expected, while another group said the framework was largely consistent with prior talks and still preserved some reward programs. The real fight is over definitions. If the final language treats certain incentives as functionally equivalent to interest, exchanges, issuers, and wallet providers could all face narrower room to structure stablecoin products.
The disagreement intensified during a Tuesday conference call. Sources said crypto firms and venture representatives clashed over whether the proposal strikes a workable balance or places unnecessary limits on innovation. Banking representatives also reviewed the draft. One attendee said the current language reflected a compromise shaped by lawmakers, including Senators Thom Tillis and Angela Alsobrooks.
Public market response was immediate
Investors reacted quickly. Circle shares fell about 20%, with analysts tying the move to concern over the proposed yield restrictions. Coinbase stock dropped roughly 10% during Tuesday trading. Criticism also spread across social platforms, where many users argued the rules could weigh on adoption, especially for products that use rewards to keep stablecoin balances active.
The Senate Banking Committee has not released the full draft publicly. People familiar with the matter expect wider circulation soon, while the argument over stablecoin yield, promotional incentives, and regulatory discretion continues.