Inside the White House talks between crypto firms and banks on stablecoin rewards

Cryptocurrency advocacy groups called Monday’s White House meeting to discuss an intensely contested topic on how to treat stablecoin rewards as “an important step” and “exactly the progress needed” as lawmakers try to push crypto legislation through fits and starts, but compromises may not come smoothly.

Representatives from Coinbase, major crypto trade groups, and banking organizations descended on Washington, D.C., to try to hash out how the treatment of stablecoin rewards and whether third parties, such as Coinbase, should be allowed to offer those rewards. Patrick Witt of the President’s Council of Advisors for Digital Assets led the meeting.

“Today’s White House meeting was an important step forward in finding solutions to deliver bipartisan digital asset market structure legislation, and we applaud Patrick Witt and the Administration’s leadership in bringing stakeholders together to work through one of the key remaining issues: stablecoin rewards,” said Blockchain Association CEO Summer Mersinger in a statement. Coinbase is a member of that group.

Key Senate committees have been closing in on moving forward legislation to regulate the crypto industry at large, by divvying up jurisdiction between the Securities and Exchange Commission and the Commodity Futures Trading Commission, and setting up disclosure standards, among other requirements.

Last week, the Senate Agriculture Committee advanced its bill that focuses on the CFTC, though it did not get Democratic support. The issue around stablecoin yield has been a focus more for the Senate Banking Committee, which had a hearing scheduled last month, but was pulled at the eleventh hour after Coinbase voiced it would not be supporting the bill, citing stablecoin yield treatment as an issue.

The Digital Chamber CEO Cody Carbone said they were committed to ensuring “legislative progress does not punish innovation or consumers.”

“Today’s meeting at the White House was exactly the kind of progress needed to find a resolution to one of the biggest issues blocking next steps in market structure legislative progress,” Carbone said in a statement.

Banking groups have sharply criticized a stablecoin law known as GENIUS, which passed over the summer. While the law bars issuers from paying direct interest to stablecoin holders, it does not prohibit third-party platforms such as Coinbase from offering rewards. Banks say deposits could be drawn away and could hurt community banks. Meanwhile, crypto firms such as Coinbase say the issue had already been debated ahead of passing GENIUS and accuse banks of trying to curb competition.

Rigid compromises

A source at the White House meeting said all sides were talkative on Monday, and someone made a comment that banks were “outnumbered.” The group will also be narrowed for future meetings as the White House wants them to come prepared to make decisions and compromises, the source said.

The source also noted that bank representation was rigid in their approach, indicating that they did not have the flexibility to negotiate a compromise through their member banks.

Carbone said there was no “final resolution” reached during Monday’s meeting, but he said it was possible to reach a compromise by the end of the month.

“Although no redlining took place or solution was reached, the two sides have identified pain points and potential areas of compromise, with an identified path forward of reaching a solution by the end of February,” he said in a statement.

The Bank Policy Institute, the American Bankers Association, the Financial Services Forum, and the Independent Community Banks of America were also at the meeting. They did not immediately respond to a request for comment about details on bank membership at the meeting, but released a statement.

“As we shared in the meeting, we must ensure that any legislation supports the local lending to families and small businesses that drives economic growth and protects the safety and soundness of our financial system,” they said, along with the Consumer Bankers Association. “Banks of all sizes will continue to work with lawmakers, the White House and other stakeholders to help develop thoughtful, effective policy around digital assets.”

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