‘We do not see a middle ground’: TD Cowen says stablecoin yield fight could still delay crypto bill

Bank trade groups formally opposed a proposed stablecoin yield compromise, adding to concerns that the crypto market structure bill may struggle to pass this year, according to investment bank TD Cowen.

Groups representing banks of all sizes — including the Bank Policy Institute, the Financial Services Forum, the Independent Community Bankers of America, the Consumer Bankers Association, and the American Bankers Association — said on Monday that the proposed compromise, which would still allow crypto platforms to offer rewards tied to the use of stablecoins in transactions, “falls short.”

Their objection matters because it is not just small and mid-sized banks that are opposing the proposal, but also large banks represented by the Bank Policy Institute and Financial Services Forum, Jaret Seiberg, managing director at TD Cowen’s Washington Research Group, said in a Tuesday note.

“A united front gives the banking industry more clout in this fight. It is why we believe it not a forgone conclusion that crypto will win this fight and the banks will lose,” Seiberg said.

He said he does not see a solution that would satisfy both sides.

“We do not see a middle ground that would satisfy the banks and the major crypto platforms as we believe some crypto platforms want the ability to keep paying yield to encourage retail investors to keep their liquidity in their crypto wallets. That is a nonstarter for the banks,” Seiberg said.

He added that “banks have an edge” as proposed rules from the Office of the Comptroller of the Currency under the GENIUS Act could restrict most stablecoin yields. While legal challenges are expected, Seiberg said banks could rely on these rules if the crypto bill, or Clarity Act, is not passed.

“This fight could push a mark-up to June,” Seiberg said. “Our view remains that the August recess is the deadline for enacting this bill.”

The proposed compromise was released on Friday by Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks. It would still ban interest or yield on stablecoins that is similar to interest paid on bank deposits, while allowing certain rewards tied to the use of stablecoins in transactions.

Seiberg said in a separate Monday note that this approach may not satisfy banks, and they are likely to continue to oppose it.

“Time is starting to run short. For the Senate to vote by late July, the bill likely needs to emerge from Senate Banking by late June. Given the Memorial Day holiday, that leaves only a few weeks for action,” Seiberg said in the Monday note.

Earlier Tuesday, Ripple CEO Brad Garlinghouse said the next two weeks are critical for crypto legislation. “Candidly, if it doesn’t happen, then I think the likelihood is going to drop precipitously because if it gets into midterms — it’s going to be too much of a loaded issue,” Garlinghouse said. “Then, post-elections in the fall, I think the likelihood that it gets picked up is even lower.”

Crypto bill hurdles

Seiberg has remained skeptical about the crypto bill’s passage this year. Beyond the stablecoin yield issue, he has pointed to several hurdles in recent weeks, including a lack of Commodity Futures Trading Commission commissioners, conflicts tied to a crypto project linked to President Donald Trump, World Liberty Financial, and concerns around Iran’s use of crypto payments that could hinder the bill’s passage.

Last week, Seiberg said Republican Senator Thom Tillis has become the “latest roadblock” to the crypto bill as he pushes for ethics provisions to be included in the Clarity Act. Tillis, a member of the Senate Banking Committee, has reportedly said he would oppose the bill if it does not include such language.

Overall, passing the Clarity Act will not be easy, Seiberg has said in recent notes.

Seiberg has previously also said that passing the bill will likely require personal involvement from Trump, along with compromises that can receive bipartisan support and clear the 60-vote threshold in the Senate. In March, he said he is “increasingly pessimistic” and sees only a one-in-three chance of the bill passing this year. Earlier, he said the bill could be delayed to 2027, with final rules potentially taking effect in 2029 if hurdles are not resolved this year.

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