French Hill urges Senate to take up House crypto bill amid stablecoin yield fight

Top Republican in the House of Representatives, French Hill, has some advice for his colleagues in the Senate on how to unstick its stablecoin yield problem. 

For more than a year, both the Senate and the House have been working to pass broad legislation to regulate the cryptocurrency industry.

Last year, the House voted to pass its version of the bill, called the Clarity Act, garnering support from both Republicans and Democrats. The House bill did not address an issue that has become a major sticking point for those in the Senate: how to treat stablecoin rewards. 

At the center of the debate is whether platforms should be allowed to pay users rewards for holding or transacting in stablecoins.

The issue was brought up in the GENIUS Act, a stablecoin law passed in July, which prohibits stablecoin issuers from paying direct interest to holders. However, the law does not bar third-party platforms, such as Coinbase, from offering rewards.

Banks have argued that allowing yields would drain deposits from traditional institutions and hurt community banks. Crypto firms say restricting yields would stifle innovation and say that the issue was already debated during consideration of the GENIUS Act.

Speaking Tuesday at the Milken Institute’s Future of Finance event, Hill suggested the Senate could simply take up the House’s broader crypto market structure bill and move forward.

“If the Senate can’t come to a straightforward conclusion here, I recommend they use the language that we have in the House-passed Clarity Act with 78 Democratic votes on it, and use that as the solution,” Hill said.

Over the past month, the White House has held meetings between both the bank and crypto sectors in hopes of coming to a solution by March 1.

A source familiar with the matter told The Block on Friday that specific issues were still being hashed out, but said that just because a deal was not finalized by March 1 does not mean that a crypto market structure bill has no chance of passing. 

Your turn, Treasury

The Treasury Department could also get involved, Hill added. The Treasury's Office of the Comptroller of the Currency issued a proposal last week to implement the GENIUS Act and asked for public comment. 

Hill commended that move. "I would argue that the rulemaking could handle this issue quite fairly between bank and nonbank stablecoin issuers," he said. 

The continued fight between crypto and banking over stablecoins yields could put the broader crypto market structure bill at risk, said Jaret Seiberg, managing director at TD Cowen's Washington Research Group, in a note on Monday. 

The OCC proposal establishes a rebuttable presumption that third-party yield arrangements may be illegal if issuers coordinate with affiliates or related entities that then pay holders for holding the stablecoin, Seiberg said.

The OCC could revise its position after public feedback, or issuers and platforms could restructure contracts to avoid the regulator’s “presumed illegal” standard and preserve some form of yield, Seiberg said.