Crypto industry stalwarts have urged the Senate Committee members to not expand limitations on stablecoin rewards.
It was on July 18 that the U.S. President Donald Trump signed the GENIUS ACT, or Guiding and Establishing National Innovation for U.S. Stablecoins, into law.
It became the first major crypto-related legislation to become law in the U.S., regulating stablecoins pegged 1:1 to the U.S. dollar.
Related: Stablecoin market faces transformation with upcoming U.S. regulations
Stablecoin 'interests' or 'yields' prohibited, not 'rewards' or 'incentives'
In simple words, a stablecoin is a type of cryptocurrency that tries to stabilize its value, unlike traditionally volatile cryptocurrencies like Bitcoin (BTC), by being pegged to a fiat currency like the USD.
As per DeFiLlama , the total stablecoin market cap is $308 billion at the time of writing.
The GENIUS Act includes a provision that prohibits stablecoin issuers from offering "any form of interest or yield."
However, there is no such restriction on crypto platforms, intermediaries, and other third parties to offer "rewards" or "incentives" to stablecoin holders.
But the banking industry thinks the provision is a "loophole" that allows stablecoin holders to gain rewards, if not interest or yield.
The banks fear their customers will transfer their deposits to stablecoins in chase for better returns. They are urging the U.S. Congress to address the "loophole" by extending the limitation on stablecoin rewards to third parties also.
But the crypto industry believes the GENIUS Act settled the issue forever and it shouldn't be reopened.
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Crypto giants urge Senate Committee to preserve GENIUS Act rewards
On Dec. 18, Blockchain Association, a consortium of more than 125 crypto companies such as Coinbase (Nasdaq: COIN), Ripple , a16z Crypto, Gemini, and Kraken, wrote a letter to the Senate Banking Committee members.
The crypto industry members urged Chairman Tim Scott and Ranking Member Elizabeth Warren not to "reinterpret and expand" the GENIUS Act's prohibition on interest or yield beyond what Congress enacted in the legislation.
Any proposal to limit rewards or incentives offered by platforms or third parties in secondary markets would "reopen a settled issue" and "suppress competition," the crypto players argued in the letter.
While the GENIUS Act prohibits stablecoin issuers from paying interest or yield, it "intentionally" allows other third parties to offer "lawful" rewards or incentives to holders, the letter underlined.
"That distinction was not accidental."
In fact, it simultaneously addressed the balance-sheet risks associated with stablecoin issuance and allowed stablecoin service distributors to innovate on payment experiences and give customers choice, the group of crypto companies argued.
The way banks offer incentives on credit cards, crypto companies offer rewards on stablecoin holdings, and any prohibition on the latter would lead to "less competition" in payments and financial services, the group warned the Senate members.
Related: Stablecoin adoption accelerates as businesses embrace real-time transactions
This story was originally published by TheStreet on Dec 19, 2025, where it first appeared in the Policy section. Add TheStreet as a Preferred Source by clicking here.
