The crypto industry has reached a critical standoff with U.S. regulators over the future of stablecoin rewards. Led by the Blockchain Association, over 125 organizations have signed a formal protest against expanding the Lummis-Gillibrand (often referred to in discussions as part of the GENIU framework) regulatory scope.
At the heart of the debate is a proposed ban that would prevent third-party service providers—not just the issuers themselves—from passing yield or rewards along to stablecoin holders.
Why the Industry is Protesting
The opposition argues that this ban would stifle the primary utility of stablecoins for everyday users. Key concerns include:
Market Competition: Smaller fintech firms and DeFi platforms rely on rewards to compete with traditional banking institutions. Removing this incentive could consolidate power among a few dominant players.
Stifling Innovation: By categorizing rewards as a restricted activity, regulators may inadvertently classify these assets as securities, creating a massive compliance burden that prevents new product launches.
User Rights: Advocates argue that users should be entitled to the economic benefits generated by the assets they own.
If this framework is adopted, it could fundamentally change the "passive income" model that has driven much of the retail adoption in the crypto space. The industry maintains that clear disclosure requirements are a better solution than an outright ban.
Would you like me to explain the legal difference between a "reward" and a "security" in this context.