How are banks trying to block the crypto market structure bill at the critical moment

The cryptocurrency industry is facing a critical test. As the sector strives to build a regulatory framework for digital assets, traditional financial institutions are exerting massive lobbying pressure to amend key provisions of a Senate bill—particularly those related to stablecoin rewards and yields.

In short, bankers are working to stifle progressive policies that allow the crypto industry to offer rewards to consumers. This opportunity will be crucial in shaping the future of digital asset regulation in the United States.

The crypto-banking divide in the stablecoin rewards debate

The core of the conflict centers on the question: should cryptocurrency platforms be allowed to offer rewards to stablecoin holders? Crypto lobbyists believe this is a legitimate utility feature that provides value to consumers. However, the banking sector views it as direct competition to traditional deposit products.

“The threat to progress is not the lack of policy engagement, but the relentless pressure campaign by big banks to rewrite the bill to protect their market position,” said Summer Mersinger, CEO of the Blockchain Association.

The American Bankers Association and other banking groups argue that stablecoin yields could threaten banking system deposits and local lending capabilities. They emphasize that restrictions on crypto depositors are critical for financial stability. Meanwhile, Wall Street executives also highlight their own interests in stablecoin payment fee systems.

But crypto advocates respond that stablecoin holdings are not like traditional bank deposits because these holdings are not reused by crypto platforms for their own lending operations. “Stablecoin holdings are not insured, and there is no federal backstop,” argues the industry’s most common point. “Therefore, the dynamics are fundamentally different.”

GENIUS Act and ongoing lobbying pressure

Last year, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act was passed, establishing clear rules: stablecoin issuers can offer rewards, but other parties like exchange platforms can also provide legal incentives to customers.

This compromise emerged after lengthy negotiations. But since the new Senate bill entered the crypto market structure debate, banker lobbyists quickly pushed to amend the GENIUS framework.

The result: last week, the Senate Banking Committee released a draft bill with a new stablecoin rewards clause. The compromise allows rewards only on static holdings (similar to a savings account model), but not on actively used stablecoins. This is a significant restriction compared to the GENIUS Act.

Kara Calvert, Vice President of US Policy at Coinbase, said in an interview that this issue has become a distraction from more important market structure provisions. “We negotiated with GENIUS in July, and banks have spent seven months lobbying against it. This is not a market structure issue—there are other critical components of the bill we need to ensure.”

Senate bill markup: where crypto’s position stands

The committee markup is focused this week, with a possible Senate floor vote soon. But the political math is not guaranteed to favor crypto advocates. Democrats may be unsure whether to support it, and other compromises still need to be negotiated.

Additionally, the Senate Agriculture Committee—also with jurisdiction over crypto regulation—has delayed its own markup until the end of the month. This provides more negotiation time among the parties.

The influence of the banking industry is evident in every revised draft. The Blockchain Association and other crypto groups have sent a joint letter ensuring that the neglect of the GENIUS Act will result in a “status quo that is entirely unusable.” In other words, without compromise, the regulatory environment will become even more difficult.

Brian Armstrong, CEO of Coinbase, publicly warned that his company will not support any bill that favors bankers and terminates customer rewards. The company reported $355 million in stablecoin-related revenue in Q3—a significant stake in the regulatory outcome.

Regulatory implications and market impact ahead

The arrival of the crypto market structure bill is a historic opportunity—and a risk. The outcome of the stablecoin rewards debate will reveal who has greater political leverage: the established banking system or the emerging crypto industry.

Corey Frayer, a crypto adviser who previously worked at the SEC under Gary Gensler and now with the Consumer Federation of America, noted that the practical impact of yield restrictions may be limited. “Platforms can still offer rewards through staking and lending activities that are explicitly exempted from the ban. So it’s not a comprehensive yield prohibition.”

Meanwhile, in the tech sector, the Pudgy Penguins NFT project has emerged as one of the strongest native crypto consumer brands. Its ecosystem includes retail partnerships, games (Pudgy Party reached 500k downloads in two weeks), and distributed tokens (airdropped to over 6 million wallets), with over $13 million in retail sales. This demonstrates broader adoption trends independent of regulatory debates.

In the banking sector, speculation about a leadership change at the Federal Reserve adds further complexity. While Jerome Powell’s term ends in May, analysts speculate that Rick Rieder of BlackRock could be a possible successor. Financial figures like Rieder have previously supported Bitcoin’s merits, which could shift the regulatory tone.

The ultimate resolution depends on how political forces in the Senate align. The crypto industry has already sacrificed some protections under the GENIUS Act to gain clarity on market structure. But if bankers continue to block the bill through lobbying, the entire regulatory framework could become more restrictive than expected.

The stakes are high not only for stablecoin platforms but for the entire cryptocurrency industry in the US.