US senators move to ban stablecoin yields on USDC and similar tokens
A bipartisan agreement from two U.S. senators would ban stablecoin yields, restricting crypto firms from paying interest on stablecoin holdings like USDC. The rule is part of the Digital Asset Market Structure bill and aims to end regulatory uncertainty around “stablecoin yields.”
Under the proposed framework, stablecoin yield payments are prohibited in a way similar to traditional bank deposits across all digital asset market participants. The only exception would be genuine, transparent rewards tied directly to users’ real transactions. The U.S. Treasury Department and the CFTC are authorized to write detailed rules within one year after enactment.
Industry reactions are split. The Blockchain Association said the stablecoin yields ban language is a step forward, while the Crypto Council for Innovation argued the scope is broader than last year’s GENIUS Act because it applies beyond issuers. Circle’s chief strategy officer strongly supported it, noting growth in USDC and EURC use for cross-border payments and collateral.
Operationally, companies may need to restructure “hold-to-earn” reward programs so that only activity- and transaction-linked rewards remain compliant. Coinbase has supported the compromise, with its legal chief saying active participation rewards are preserved.
Overall, the stablecoin yields ban could reshape yield products in the short term, but may also improve market stability by clarifying rules for compliant stablecoin services.
Neutral
The proposal targets “stablecoin yields” by banning interest-like payments on stablecoin holdings (e.g., USDC), which can dampen short-term demand for hold-to-earn or passive yield products—often a driver for stablecoin-driven DeFi activity. At the same time, the allowance for transparent, transaction-linked rewards and the timeline for detailed CFTC/Treasury rules may increase regulatory clarity, benefiting compliant issuers and exchanges.
Historically, U.S. crypto rule changes that first look restrictive can initially create volatility (flows rotate away from impacted yield strategies), but the direction often stabilizes once firms redesign products to meet requirements. Expect short-term uncertainty around yield models for stablecoins, followed by longer-term market reshaping toward activity-based reward structures and clearer compliance boundaries.