Negotiations over stablecoin incentives are close to a major breakthrough with administration officials determined to settle one of the last issues holding back the crypto legislation in general. With in, depth discussions speeding up, the lawmakers are working toward having a deal ready before March 1 enabling Senate debate on market structure reforms.
The White House organized a series of talks between the banking industry and representatives of the digital asset world, using the draft legislation as a negotiation tool to help locate differences. The officials concentrated on establishing a very clear distinction between interest, style rewards which should be banned and the kind of incentives that are allowed and are linked to user activity, e.g., transaction based benefits. People who know about the negotiations have said that the payment for simply holding the asset is not going to be accepted in the new framework.
Banks have pointed out that in general the stablecoin rewards could cause the depositors to move their money away from the banks and thereby put banks under liquidity pressure. The crypto companies have answered by saying that if the rules are made too tight, it would be like killing the goose that lays the golden eggs and the banking sector would become even more privileged. The draft provisions being examined would provide regulators with the instruments to take a closer look at those programs which are aimed at getting around the rules and to the authority to impose penalties if the situation merits it.
Resolving the dispute over stablecoins is seen as a key step to unlocking a wider legislative package. Members of Congress have indicated that before they can go ahead with comprehensive reforms of the market structure, they need to know how stablecoins will be treated. The Senate Banking Committee will likely return to its discussion of the bill markup as soon as the final wording is agreed.
On a different note, the U.S. Securities and Exchange Commission has changed its internal guidance to permit broker, dealers to include most high, quality stablecoin holdings as part of their capital requirements, albeit with a small discount. Although this change was made via staff channels rather than a formal rulemaking, it nevertheless offers firms greater operational leeway when incorporating stablecoins into their trading and custody arrangements.
As talks heat up and new drafts are being exchanged, the sides feel that they are close to a deal. Signed, off agreement on stablecoin incentives could be the key to solving the crypto legislation puzzle and setting federal action in motion in the coming weeks.
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