Senate unveils updated market structure bill limiting stablecoin rewards on idle holdings

U.S. senators drew a sharp line on stablecoin rewards in a draft market structure bill that prohibits yields for simply holding stablecoin balances but allows activity-linked incentives, laying out the policy direction ahead of Thursday’s markup.

Senate Banking Committee Chair Tim Scott released a new bipartisan draft of what he described as a “negotiated market structure bill.” The legislation aims to resolve one of the most contentious issues in the negotiations, following weeks of back-and-forth discussions involving crypto firms and the banking sector.

The bill text states that digital asset service providers would be prohibited from paying any form of interest or yield for users merely holding payment stablecoins. However, it allows exceptions for activity-based rewards or incentives linked to actions such as making transactions, staking, providing liquidity, or posting collateral.

The new language reflects a compromise floated last week by Democratic Senator Angela Alsobrooks, one of the key negotiators. Under Alsobrooks’ proposal, a crypto exchange can offer yield on stablecoins if the customer takes certain actions, such as selling their stablecoins, but cannot offer such rewards for stablecoin balances sitting in an account.

Stablecoin rewards

Stablecoin yields have become a major point of tension between banks and the crypto industry.

Banking groups argue that the GENIUS Act, passed in July 2025, introduced new liquidity risks by leaving loopholes that allow issuers or platforms to offer interest-like returns. The stablecoin law bars issuers from paying direct interest, but does not restrict third-party platforms such as Coinbase from providing rewards to users.

On the other hand, crypto firms contend the issue was already settled during the GENIUS Act negotiations and accuse banks of trying to curb competition. 

Coinbase recently warned that it would withdraw support for the market structure bill if lawmakers went beyond enhanced disclosure requirements to restrict reward programs more aggressively.

Beyond stablecoins, the latest draft incorporates a separate bipartisan measure from Senators Cynthia Lummis and Ron Wyden. Their proposal would shield software developers and infrastructure providers from being treated as financial intermediaries simply for creating or maintaining code — a longstanding concern for open-source contributors who feared that liability standards could sweep them into regulatory obligations. That language now appears to be integrated into the Banking Committee’s bill.

One issue that does not seem to be addressed in the bill text released late Monday is around concerns about President Donald Trump and his family’s crypto ventures. 

Some Democrats had pushed for an ethics provision to be included in legislation. Bloomberg estimated last summer that the sitting president had generated about $620 million from his family’s cryptocurrency businesses. Among them is World Liberty Financial, a DeFi and stablecoin initiative that names Trump and his three sons as co-founders. The family also owns a 20% stake in the mining company American Bitcoin. 

Last week, Senate Democrat Ruben Gallego spoke with CNBC Correspondent Emily Wilkins about an ethics provision and said that some people “don’t understand that this is going to kill the bill.”

Legislative advancement

The broader manager’s amendment marks a significant step toward advancing the legislation to the banking committee’s scheduled markup on Thursday.

The document addresses remaining gaps in the bill that seeks to define how the Securities and Exchange Commission, Commodity Futures Trading Commission, and other federal agencies can regulate digital asset markets.

Meanwhile, the Senate Agriculture Committee postponed its Thursday hearing on the crypto legislation until the end of the month, with the chair citing a need for additional time. Both versions from the Senate Agriculture Committee and the Senate Banking Committee would need to be reconciled before heading to a full Senate vote. 

Afterwards, lawmakers will have to decide how to move forward with the House’s version, the Digital Asset Market Clarity Act, which passed the full House over the summer. One final bill then would have to go through the House and Senate before landing on President Donald Trump’s desk to be signed into law.

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