Draft U.S. bill would ban passive stablecoin yield

A newly circulated draft of U.S. crypto market-structure legislation would prohibit passive yield on payment stablecoins while laying out rules for other digital-asset activity. The text was shared recently in Washington as lawmakers work on a comprehensive framework for exchanges, stablecoins, decentralized finance and self-custody wallets.

The draft would prevent issuers and digital-asset service providers from paying interest-like returns to U.S. users solely for holding payment stablecoins. The provision targets what the bill calls “idle yield,” a return that regulators and lawmakers say could make certain stablecoins function like bank deposits.

Banking groups support the restriction. The American Bankers Association has asked bank executives to lobby lawmakers, arguing that yield-bearing stablecoins could draw deposits away from traditional banks and act as blockchain-based savings accounts that bypass parts of the banking system.

Crypto industry figures and some lawmakers object to the limit. In a post responding to criticism from banking groups, Paul Grewal wrote, “You got idle yield killed.” Other crypto executives accused banks of using lobbying to protect control over deposits and payment infrastructure.

The draft also includes provisions that market participants view as favorable to digital-asset firms and retail users. It proposes legal categories for network tokens and digital commodities, clearer registration pathways for crypto companies, protections for lawful self-custody in self-hosted wallets and steps to reduce uncertainty around secondary-market token trading. The bill would expand anti-money-laundering, sanctions and compliance obligations for intermediaries in the digital-asset space.

The text draws a specific line between prohibited passive returns and permitted rewards. Issuers and platforms could continue offering loyalty programs, usage incentives or transaction-based rebates that reward active behavior, but they could not pay simple holding interest on payment stablecoins that would mimic a savings account.

For consumers, the draft presents mixed effects. Retail users could gain clearer legal status for many digital assets, stronger reserve and disclosure requirements for stablecoin issuers and broader access to regulated crypto services. At the same time, ordinary users could lose easy passive yield opportunities that developed outside the banking system in recent years.

Negotiations on the bill are ongoing in Congress. Lawmakers are weighing financial stability and consumer protection concerns against the goal of providing legal clarity and supporting innovation. Supporters of tighter stablecoin limits emphasize the need to protect the banking system and depositors, while advocates for broader crypto authority highlight the bill’s legal clarifications and self-custody protections.

The draft’s combination of stricter limits on passive stablecoin yield and broader protections for other crypto activities has sharpened the competition between banks and blockchain-based payment systems. Banks have backed the yield restriction, and crypto firms have objected to what they describe as the removal of a key retail feature of stablecoins.