The clash between Wall Street and the crypto sector over yield-bearing stablecoins is intensifying in Washington.
The stablecoin industry needs more options for offering yield to users, according to Will Beeson, founder and CEO of RWA liquidity layer Multiliquid and Uniform Labs, and former head of tokenized asset infrastructure at Standard Chartered.
“In a competitive market with others issuing their own stablecoins, you end up in a situation where you’re looking for ways to incentivize users to use your stablecoin,” Beeson told Decrypt. “The ability to pay yield would be an important way to do that.”
The GENIUS Act and stablecoin yields
Beeson’s comments come as the federal government implements the GENIUS Act, legislation signed by President Donald Trump in July to create the first formal U.S. framework for stablecoin issuance and trading. While the law bars issuers from paying yield, it stops short of banning third parties such as exchanges from offering interest or rewards on stablecoin holdings.
For instance, crypto exchange Coinbase pays interest on USDC balances held on its platform in Circle’s stablecoin USDC, effectively offering yield through a third party.
“What is prohibited under GENIUS is the ability for stablecoin issuers to pay interest or yield directly to holders,” Beeson explained. “The bill does not prevent intermediaries or third parties from paying incentives.”
That gap has become the flashpoint of a lobbying battle. “My understanding is that it has to do with requests by the banking lobby as the regulation was structured, and fears about yield-bearing stablecoins effectively providing a much more attractive savings tool than lower-yielding bank deposits,” Beeson said.
Banks have pressed Congress to close the door completely. In an August 12 letter, the Bank Policy Institute and four other major trade groups warned lawmakers that leaving the so-called loophole intact could drain as much as $6.6 trillion from the U.S. deposit system.
“Without an explicit prohibition applying to exchanges, which act as a distribution channel for stablecoin issuers or business affiliates, the requirements in the GENIUS Act can be easily evaded and undermined by allowing payment of interest indirectly to holders of stablecoins,” it said.
“The result will be greater deposit flight risk, especially in times of stress, that will undermine credit creation throughout the economy,” the BPI’s letter argued, adding that the resulting reduction in credit supply would lead to “higher interest rates, fewer loans, and increased costs for Main Street businesses and households.”
Crypto groups fight back
Crypto groups have fought back. On August 20, the Blockchain Association and the Crypto Council for Innovation sent their own letter urging regulators to resist bank pressure and disputing the $6.6 trillion claim. “This claim does not hold up to scrutiny,” the letter read.
Cutting off yield, they warned, would freeze innovation and leave U.S. firms at a disadvantage internationally. “Allowing responsible, robustly regulated platforms to share benefits with customers is not a loophole – it is a feature that promotes financial inclusion, fosters innovation, and ensures American leadership in the next generation of payments,” they said.
Still, Beeson said expectations for any near-term change to the law should be tempered. “I think realistically it’s less than a fifty percent chance,” he said, pointing to Washington’s legislative gridlock.