# Banks Win Key Battle as Crypto Bill Bars Stablecoin Interest Payments
🔥 Key Takeaways
- The latest Senate draft of the crypto market structure bill prohibits stablecoin issuers from offering interest payments “solely in connection with the holding of a payment stablecoin.”
- This provision is seen as a win for traditional banks, which have long argued that crypto firms offering yield on stablecoins operate outside regulatory oversight.
- The move could significantly impact decentralized finance (DeFi) platforms that rely on stablecoin yield mechanisms.
- Regulators continue to tighten rules around stablecoins, emphasizing consumer protection and financial stability.
## The Senate’s Stablecoin Crackdown
The latest version of the crypto market structure bill, currently under Senate review, includes a critical provision that restricts stablecoin issuers from paying interest to holders. The draft explicitly prohibits yield “solely in connection with the holding of a payment stablecoin,” effectively preventing crypto firms from competing with traditional banks in offering interest-bearing accounts.
This development marks a significant victory for the banking sector, which has lobbied against crypto firms providing yield on stablecoins without the same regulatory scrutiny as banks.
## Why This Matters for Crypto and DeFi
Stablecoins, particularly those like USDC and USDT, have become foundational to decentralized finance (DeFi). Many platforms offer yield on stablecoin deposits through lending, staking, or liquidity provision. If this bill passes, issuers like Circle (USDC) and Tether (USDT) may no longer be able to facilitate interest payments directly, forcing users to rely on DeFi protocols instead.
However, regulators may extend oversight to DeFi platforms, further complicating the landscape. The bill could accelerate the push for compliant yield solutions, such as registered money market funds or bank-partnered stablecoin products.
## Broader Implications for Crypto Regulation
This provision signals a growing trend of regulatory efforts to bring stablecoins under traditional financial frameworks. The SEC and Fed have repeatedly warned that unregulated yield-bearing crypto products pose risks to consumers and financial stability.
While the bill aims to protect investors, critics argue that it stifles innovation and favors legacy financial institutions. The final version of the legislation will be crucial in determining whether crypto firms can adapt or if traditional banks will dominate the future of digital payments.
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