Stablecoins face curbs as White House holds third talks

The White House is weighing a limited approach to stablecoin rewards rather than a blanket ban, following its third closed-door session with crypto advocates and banking groups on February 19, as reported by Tech in Asia. Discussions remain fluid and no final decision has been announced, but the direction points to narrowing which reward types are permissible while broader yield programs stay under scrutiny.

White House plan: limited stablecoin rewards, not a blanket ban

The limited stablecoin rewards plan under consideration would tighten the scope of yield-like features that platforms can offer while stopping short of a categorical prohibition. Officials have signaled interest in differentiating among reward types and in discouraging constructs that resemble deposit-like interest without comparable safeguards.

In practice, that distinction likely centers on passive, balance-based APYs versus more narrowly tailored incentives tied to user activity. While specific definitions have not been published, the policy thrust appears aimed at curbing quasi-deposit substitutes while preserving room for narrowly defined, utility-driven incentives.

Why it matters: banks seek limits; industry defends stablecoin yield

Banking trade groups are pressing for strict limits or an outright ban on most stablecoin rewards, arguing they could siphon insured deposits and introduce stability risks, according to CoinCentral. Concerns extend to the possibility that stablecoin rewards, if framed like interest, could blur lines with banking activity without equivalent supervision.

As reported by Barron’s, deposit flight and the potential undermining of traditional bank funding models are central to banks’ objections. The contention is that yield-like features could tilt consumer behavior away from savings accounts toward digital wallets offering returns.

Industry groups counter that well-designed rewards are integral to competition and onshoring activity, provided programs are transparent and regulated. “An important step forward in finding solutions to deliver bipartisan digital asset market structure legislation,” said Summer Mersinger, CEO, Blockchain Association.

The administration’s mediating posture has included reminders that banks possess regulatory avenues, such as OCC charters, to develop comparable offerings within existing prudential frameworks. Urging calm amid negotiations, “don’t panic,” said Patrick Witt, Senior White House Crypto Adviser.

Immediate impact: possible allowance for transaction-based rewards only

A near-term compromise under discussion would allow narrowly defined transaction-based rewards while restricting passive, balance-based yields, as reported by The Block. Participants characterized the latest round as progress, but no definitive accord has been announced.

Transaction-based rewards typically align with specific actions, such as payment cashbacks, fee rebates, or limited promotional credits, and do not accrue simply for holding a balance. If adopted, platforms would likely need clear disclosures distinguishing such incentives from bank interest, along with controls to avoid de facto savings products.

Timing remains a risk factor. Treasury Secretary Scott Bessent has warned that if market-structure legislation, including stablecoin reward provisions, slips past spring, the probability of passage could diminish materially given political calendar dynamics, according to Whale Alert.

Stablecoin rewards vs. bank interest: key differences

Stablecoin rewards are platform incentives that may arise from fee revenues, promotional budgets, or on-chain activity, whereas bank interest reflects a regulated intermediation model backed by deposit insurance and access to central bank liquidity. The latter is governed by comprehensive prudential standards; the former typically operates under money-transmission or special-purpose regimes without deposit insurance.

Banks can pursue national bank or trust charters from the OCC to offer crypto-adjacent services within established oversight, while stablecoin platforms face evolving state and federal expectations on disclosures, segregation of reserves, and risk management. The policy debate turns on preventing “deposit-like” constructs outside banking regulation while permitting limited, utility-focused incentives that do not function as savings substitutes.

At the time of this writing, Coinbase (COIN) recently traded around $166.30 in overnight activity, providing a neutral reference point for broader crypto-exposed equities based on data from NasdaqGS via Yahoo Finance. This market context does not imply any direction for policy outcomes or future performance.