Bitcoin approaches $100,000, the U.S. digital currency regulatory plan faces a key vote, and Wall Street and the currency circle have a

# Source: Wall Street Insights

## By Zhao Ying

The fate of the U.S. digital currency regulatory framework hangs in uncertainty, with the payment of stablecoin yields emerging as the biggest point of contention. Banking lobbying groups argue that while direct yield offerings to users by stablecoin issuers are prohibited, loopholes remain for providing incentives to partners and third parties. In a statement, Coinbase’s CEO criticized the draft amendment for "effectively killing stablecoin rewards and allowing banks to shut out competitors". Another contentious issue is the provision restricting decentralized finance (DeFi) that could grant the government "unfettered access" to users’ financial records.

Bitcoin has recently staged a strong rebound to a two-month high of $97,500, inching closer to the key $100,000 threshold. This rally coincides with the U.S. Senate Banking Committee’s preparation for a crucial vote on the Crypto Market Structure Bill. However, the bill’s fate has become uncertain amid intense wrangling between Wall Street banks and the crypto industry over the right to offer stablecoin yields.

On the eve of the Senate Banking Committee’s scheduled review of the bill on Thursday morning, Brian Armstrong, CEO of Coinbase—the largest U.S. crypto exchange—suddenly announced on social media that the company was withdrawing its support for the legislation. Armstrong stated, "We would rather have no bill than a bad bill", citing multiple key concerns including restrictions on stablecoin rewards, tokenized stocks, and decentralized finance.

This announcement has dealt a major blow to the bill’s prospects. Originally designed to clarify the regulatory division of labor between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) for the crypto industry, the bill was regarded as a landmark piece of legislation to legitimize the sector. Nevertheless, disagreements between banking lobbyists and crypto firms over stablecoin yield payments, coupled with Democratic demands to include conflict-of-interest provisions for government officials, could derail the bill during the committee vote.

A crypto lobbyist, speaking on condition of anonymity, told *Fortune* magazine, "This bill could really fall apart at the committee stage. Industry insiders are feeling extremely frustrated right now."

### Stablecoin Yield Rights Emerge as Core Controversy

The payment of stablecoin yields has become the most divisive issue in the bill. Banking lobbying groups contend that while the **Genius Act**, passed last summer, bans stablecoin issuers from directly offering yields to users, it leaves loopholes for providing incentives to partners and third parties.

Rebeca Romero Rainey, President and CEO of the Independent Community Bankers of America (ICBA), stated in an interview that her organization is seeking a "comprehensive ban" that applies not only to stablecoin issuers but also to exchanges, third parties, and affiliated entities. The American Bankers Association (ABA) organized a petition signed by over 3,200 bankers, urging the Senate Banking Committee to "strengthen the existing ban by extending interest restrictions to digital asset exchanges, brokers, dealers, and other affiliated parties".

The banking sector’s core argument is that allowing crypto companies to offer yield-like rewards on stablecoin reserves would trigger deposit outflows from the banking system, forcing banks to cut lending and harming local economies. The ICBA has even launched an advertising campaign targeting members of the Senate Banking Committee.

The current draft of the Market Structure Bill includes provisions prohibiting crypto companies from offering rewards tied to stablecoin holdings, but exempts certain incentives from membership or loyalty programs. A bipartisan group of senators proposed a compromise in the **Clarity Act**, allowing crypto firms to offer yields on stablecoin-related transactions, similar to credit card reward mechanisms.

However, this compromise clearly failed to meet Coinbase’s requirements. The company reported $355 million in stablecoin-related revenue in Q3 2025 and offers yields to holders of its USDC stablecoin. In his statement, Armstrong criticized the draft amendment for "effectively killing stablecoin rewards and allowing banks to shut out competitors".

### Bill’s Scope Triggers Multiple Concerns

Beyond the stablecoin yield issue, Armstrong also voiced strong opposition to other provisions in the bill. He warned that the proposal includes a "de facto ban" on tokenized stocks, as well as DeFi restrictions that could grant the government "unfettered access" to users’ financial records.

Armstrong further criticized the draft for weakening the CFTC’s authority, making it "subordinate" to the SEC—a move he argued would stifle innovation. Maghnus Mareneck, CEO and Co-Founder of Cosmos Labs, told *The Defiant*, "If Congress closes current loopholes, interest-bearing stablecoins could be phased out. In this legislation, crypto exchanges are likely to be less favored than banks, and privacy protocols will face greater pressure."

An anonymous crypto lobbyist complained to *Fortune* that to secure bipartisan support, the bill has "tilted leftward", incorporating provisions to regulate DeFi, establish crypto token listing procedures, and expand oversight responsibilities for the SEC. "They’ve lost their North Star," the lobbyist commented.

Ron Hammond, Director of Policy at crypto trading firm Wintermute, said, "This is still being negotiated. But this is crypto—there’s always last-minute drama, so this seems like one of those sticking points."

### Conflict-of-Interest Provisions Add Political Variables

Another contentious issue pushed by Democrats is the inclusion of provisions to prevent politicians from profiting from crypto holdings or interests. This matter has come to the forefront due to the Trump family’s deep ties to the crypto industry, including the recent application for a federal banking license by its digital asset platform, World Liberty Financial.

However, Republicans vehemently oppose this proposal. Senator Tim Scott of South Carolina, Chairman of the Senate Banking Committee, told CoinDesk on Wednesday that ethics provisions fall outside the scope of the **Clarity Act**.

In a letter obtained by *Fortune* addressed to Scott and the committee’s top Democrat, Senator Elizabeth Warren of Massachusetts, multiple non-profit watchdog groups described the lack of conflict-of-interest provisions in the proposed bill as "deeply concerning".

If Democrats like Senator Ruben Gallego of Arizona—who view ethics provisions as a "red line"—withdraw their support, the bill could stall in committee. The committee requires a simple majority to pass the bill, despite Republican dominance.

### Bill’s Prospects Remain Highly Uncertain

According to sources familiar with the matter, the number of amendments expected to be considered on Thursday exceeds 100 and has continued to grow throughout the week. Senator Thom Tillis, a Republican from North Carolina, and Senator Angela Alsobrooks, a Democrat from Maryland, have been active on the stablecoin yield issue and are expected to introduce relevant amendments.

Jaret Seiberg, Managing Director at TD Cowen, stated in a research note, "We believe the agreement is that platforms cannot pay rewards for holding stablecoins, but can pay rewards for using stablecoins. This is similar to how banks offered rewards for debit card usage before the Durbin Amendment, even though checking accounts did not pay interest."

Gabe Rosenberg, Partner in the Financial Institutions Group at Davis Polk, commented, "This bill is no longer the opening bid, but it’s certainly an anchor. Still, there’s a lot of room for maneuver. Tomorrow is really crucial for understanding the overall direction."

The Senate Agriculture Committee announced on January 13 that it would postpone its own Crypto Market Structure Bill, planning to release the text on January 21 and hold a hearing on January 27. However, the Senate Banking Committee is expected to proceed with its scheduled review on Thursday as planned.

Peter Dugas, Managing Director at Regulatory Intelligence Group, said, "The real question will be whether digital asset companies, not the banking industry, are satisfied with this. I think that’s the biggest overall concern as we move forward."

For the crypto industry, following the successful passage of the stablecoin-focused **Genius Act** last summer, comprehensive market structure legislation was seen as key to granting legitimacy to the emerging sector. But after years of intense debate, the final product emerging from the Senate could end up being worse than no bill at all. Coinbase’s withdrawal of support has undoubtedly cast a shadow over the bill’s prospects, which still has a long way to go to secure the strong bipartisan backing it needs.

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