The banking industry is making a final push to tighten restrictions on stablecoin rewards just days before a key Senate committee votes on major cryptocurrency legislation.
While many Americans were celebrating Mother's Day with their families, American Bankers Association CEO Rob Nichols sent a letter to bank executives on the night of May 10 urging industry leaders to immediately contact senators over concerns that the proposed legislation does not go far enough in limiting crypto firms from offering "interest-like rewards" tied to stablecoins.
"I am reaching out to make every bank leader in this country aware of an urgent advocacy fight that requires your immediate engagement,"Nichols wrote in the letter to CEOs.
The effort comes ahead of Thursday's scheduled markup hearing by the Senate Banking Committee on sweeping crypto legislation designed to establish a federal regulatory framework for digital assets and clarify oversight responsibilities among federal agencies.
Related: U.S. Senate bans members from trading on popular prediction markets
Banks warn stablecoin rewards could pull deposits away
Nichols said the banking industry supports creating rules for digital assets but argued that the current version of the legislation still leaves room for crypto companies to offer rewards that resemble interest payments.
"To be clear, we want Congress to put in place digital asset rules and establish responsible guardrails for the crypto industry,"Nichols said.
"The current version of the legislation, although improved from an earlier version, still does not adequately prevent crypto companies from offering interest-like rewards on payment stablecoins."
He warned that without additional safeguards, stablecoins could attract deposits away from traditional banks.
"Without additional changes, we believe the current proposal would unnecessarily incentivise the flight of bank deposits into payment stable coins, putting both economic growth and financial stability at risk," Nichols added.
The Senate Banking Committee had originally planned to hold a markup hearing in January, but the meeting was canceled after Coinbase , the largest crypto exchange in the U.S., withdrew support over concerns surrounding the treatment of stablecoin rewards.
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Compromise language still faces industry criticism
Over the past year, banking groups have repeatedly criticized the stablecoin legislation known as the GENIUS Act .
The law blocks issuers from directly paying interest on stablecoins, but banks argue it still allows platforms like Coinbase to structure rewards programs that could compete with traditional bank deposits.
Crypto companies, meanwhile, argue that broader restrictions would limit innovation within the digital asset industry.
Following months of negotiations involving lawmakers, the White House, crypto executives and banking trade organizations, Sens. Angela Alsobrooks and Thom Tillis introduced compromise language on May 2.
The revised proposal prohibits "covered parties" from paying interest or yield to U.S. users simply for holding stablecoins or through arrangements "economically or functionally equivalent to the payment of interest or yield on an interest-bearing bank deposit."
However, the language still allows "activity-based or transaction-based rewards and incentives" connected to legitimate platform activity.
That compromise won support from Coinbase, but banking trade groups say the language remains too broad.
On May 8, several financial trade associations sent a letter to Tim Scott and Elizabeth Warren requesting technical revisions to the reward provisions.
The groups argued the bill does not clearly define whether certain activities would still be permitted, including paying customers a flat monthly amount for holding stablecoins that increases as balances grow.
"We are concerned, however, that the proposed language includes exceptions that will enable evasion of the intended prohibition and incentivize customers to hold and grow stablecoin balances at the expense of deposits,"the organizations wrote.
White House and lawmakers push back against banks
The debate has also triggered criticism from crypto supporters and some lawmakers.
Patrick Witt, White House digital-assets adviser, said he had previously invited Nichols and other banking executives to attend meetings in February aimed at resolving the dispute.
"They refused," Witt wrote on X . "I guess the White House was beneath them?"
Meanwhile, Senator Bernie Moreno sharply criticized the banking industry's lobbying campaign in a lengthy post on X, directly highlighting the Mother's Day timing of Nichols' message to bank executives.
"The banking cartel is in full panic mode," Moreno wrote.
He accused banks of trying to block competition from stablecoins that could offer consumers higher returns than traditional savings accounts.
"While Americans were celebrating Mother's Day with their families, the CEO of the American Bankers Association sent a frantic alert to every bank CEO in the country, demanding 'immediate engagement' to lobby Senators and kill stablecoins that would finally let everyday Americans earn real yields on their own money,"Moreno wrote.
Moreno also defended the compromise language and rejected claims that lawmakers had overlooked the issue.
"This entire issue was litigated during the GENIUS Act debate... I'm voting to break the cartel," he wrote.
The senator confirmed he plans to support the legislation during Thursday's committee vote.
Related: Over 100 crypto firms call on Senate to move forward with Clarity Act
This story was originally published by TheStreet on May 12, 2026, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.
