Stablecoin Bill Curbs Yield, Eases ETF Rules

What to Know:

• A Senate Banking Committee draft clarifies rules for stablecoin rewards and updates disclosure for tokens linked to ETFs.
• The proposal addresses concerns over stablecoin yields resembling bank deposits and aims to foster innovation while managing financial risk.
• The updated rules could impact institutional interest in XRP and Ripple by exempting certain tokens from strict disclosure if tied to ETFs.

US lawmakers are intensifying their scrutiny of stablecoin incentives and the classification of digital tokens under federal law. A newly revised draft from the Senate Banking Committee seeks to clarify the regulatory landscape around stablecoin rewards and update disclosure requirements for tokens associated with exchange-traded products. These adjustments provide insight into how Congress may approach crypto regulation as it works toward broader legislative solutions.

Stablecoin Yield Moves to the Forefront

The revised draft draws a sharper distinction between permissible rewards and prohibited yield. The legislation allows incentives based on active stablecoin usage rather than passive holding. The bill specifies that activity-based rewards do not alter a stablecoin’s legal status, meaning they do not convert stablecoins into securities or banking products.

However, the draft explicitly bans any interest or yield paid solely for holding a payment stablecoin, irrespective of whether compensation is issued in cash, tokens, or other forms. This distinction addresses concerns from traditional banking groups that yield-bearing stablecoins resemble deposit accounts. The draft permits rewards tied to real economic activity while blocking passive returns, such as incentives connected to payments, transfers, remittances, and settlement activity. It also permits benefits tied to the use of wallets, accounts, platforms, and blockchain networks.

Broader Incentives Remain on the Table

The draft expands the scope of permissible incentives to include loyalty programs, promotional offers, subscriptions, and rebates involving stablecoins. Additionally, it accommodates crypto-native functions, allowing rewards tied to liquidity provision, collateral usage, governance participation, validation, staking, and broader ecosystem engagement. The underlying principle favors participation and usage over passive holding.

ETF Status Redefines Token Disclosure Rules

The draft introduces a significant shift in how certain tokens are treated for disclosure purposes, particularly those tied to exchange-traded products. A token may be exempt from certain disclosure requirements if it serves as the ETF’s primary asset. To qualify, the product must be listed on a national securities exchange and registered under the Securities Exchange Act. The exemption applies to ETFs in existence as of January 1, 2026, reducing compliance obligations for qualifying tokens.

This provision could place several well-known tokens on equal regulatory footing with Bitcoin and Ethereum. Assets such as XRP, LTC, SOL, DOGE, LINK, and HBAR could qualify if they meet the ETF criteria. ETF inclusion effectively functions as a proxy for regulatory maturity.

Legislative Progress Remains Uneven

Despite progress at the Banking Committee, movement elsewhere has slowed. The Senate Agriculture Committee postponed its markup of the crypto market structure bill until the final week of January to secure bipartisan support. This delay underscores the complexity of aligning multiple committees on crypto legislation.

Industry Pushback Continues Outside Congress

Debate over stablecoin yield is intensifying beyond Capitol Hill. A group of US community banks urged lawmakers to revise the GENIUS Act, warning that stablecoin issuers are indirectly routing yield through exchanges and partners, potentially diverting deposits away from community lenders and reducing credit availability. Crypto advocacy groups, however, argue that tighter rules could restrict innovation and consumer choice.

As negotiations continue, the updated draft attempts to balance innovation with financial risk by drawing precise lines around stablecoin yield and token classification. While the regulatory landscape remains uncertain, these efforts signal a move toward greater clarity and structure in the digital asset space.

Related: XRP Praised: Financial Services Report Signals

Source: Original article