White House Takes Charge in Crypto Market Structure Bill Negotiations
Recent developments have seen the White House stepping up to mediate the ongoing discussions between the crypto industry and the banking sector. The focus is on resolving the stablecoin yield dispute, which has been a stumbling block in the progress of the much-anticipated crypto market structure bill, often referred to as the CLARITY Act.
White House Engages in CLARITY Act Deliberations
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This past Thursday, a significant meeting was convened at the White House, aimed at ironing out the stablecoin yield disagreements that have hindered the advancement of the CLARITY Act. The gathering featured a select group of representatives from both the cryptocurrency and banking sectors. Notably, the crypto industry was represented by key players such as Coinbase, Ripple, a16z, the Blockchain Association, and the Crypto Council for Innovation (CCI).
In contrast, the banking sector’s presence was through trade associations like the American Bankers Association, the Banking Policy Institute (BPI), and the Independent Community Bankers of America (ICBA), rather than individual bank representatives. Sources revealed that the White House assumed a leadership role in steering the discussions, diverging from previous meetings where dialogue was primarily led by crypto firms and banking trade representatives.
Addressing Banking Concerns in Stablecoin Legislation
The banking sector has expressed significant concerns over the GENIUS Act, a pivotal piece of stablecoin legislation. Critics argue that the proposed framework, which bars interest payments on stablecoins meant for payment purposes, fails to comprehensively address potential risks to the financial system. They fear that permitting issuers and platforms to offer interest on stablecoins could disrupt market equilibrium and adversely impact credit availability, particularly affecting smaller financial institutions.
To mitigate these issues, banking associations across the United States have advocated for amendments to the CLARITY Act. They propose additional provisions to prohibit digital asset exchanges, brokers, dealers, and related entities from offering yield on stablecoins. The Senate Banking Committee’s draft suggested issuers could offer rewards for specific actions, such as opening accounts or cashback initiatives, while restricting interest payments to passive token holders.
The Path Forward: Stablecoin Yield Debate Continues
During the recent meeting, Patrick Witt, Executive Director of the US President’s Council of Advisors on Digital Assets, introduced a draft text serving as the basis for discussion. This draft acknowledged the concerns raised by banks in the “Yield and Interest Prohibitions Principles” document. Journalistic insights suggest that offering yield on idle balances is no longer a viable option, and any future regulations on rewards will be narrowly defined.
The conversation has now shifted to whether crypto firms can offer rewards linked to specific activities. While some in the crypto industry perceive the banking sector’s concerns as stemming from competitive pressures, the banking representatives are lobbying for a study on the growth of payment stablecoins and their potential impact on bank deposits.
Furthermore, the White House has suggested anti-evasion measures, granting enforcement powers to the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Department of the Treasury. These measures aim to impose penalties of up to $500,000 per day for violations related to paying yield on idle stablecoin balances.
As discussions progress, banking industry representatives plan to brief their members and assess whether a compromise can be reached regarding stablecoin rewards offered by crypto firms. Optimistically, some attendees believe a resolution could be achieved by the end of the month, with negotiations set to continue in the coming days.
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