The automatic interest accrual on stablecoin balances is expected to be banned, and cryptocurrency legislation faces another setback

According to crypto journalist Eleanor Terrett, this morning's meeting on the "Cryptocurrency Market Structure Bill" (i.e., the CLARITY Act) regarding stablecoin yields was smaller than last week's, with representatives from Coinbase, Ripple, a16z, and the Crypto Industry Association in attendance, while no bank representatives attended separately; the banking industry's voice was conveyed through the industry association.

The situation of this meeting was noticeably different: the White House led the discussion, rather than allowing cryptocurrency companies and banks to dominate the conversation as in previous meetings. Patrick Witt, the Executive Director of the White House Cryptocurrency Committee, brought a draft text that became the focus of the discussion. The text acknowledged the concerns raised by banks last week in the "Prohibition of Yields and Interest Principles" document, while clearly stating that one key goal of stablecoin-related legislation is to prohibit earning yields on idle stablecoin balances. The debate has narrowed down to whether crypto companies can offer stablecoin rewards tied to specific activities; banks' concerns seem to stem more from competitive pressure rather than the initially perceived worry about deposit outflows.

Sources from the banking sector indicated that they are still working to include a study on deposit outflows in the draft—this study would examine the growth of payment stablecoins and their potential impact on bank deposits. Additionally, the banking industry is encouraged by the proposed anti-avoidance provisions, which would empower the SEC, the Treasury, and the CFTC to enforce the prohibition on earning yields on idle balances, imposing a civil penalty of $500,000 per day for each violation. Sources stated that discussions may conclude by the end of the month, with negotiations continuing in the coming days.