The quiet practice of earning passive income from stablecoin holdings may soon face federal restrictions. Lawmakers want digital currency users to actually do something if they expect returns on their money.
Senate Banking Committee Chair Tim Scott unveiled a bipartisan draft bill on Monday that bans service providers from paying interest or yields on idle payment stablecoin balances. Right now, holders of stablecoins in the U.S. can earn good returns (often 4-12% or more per year) by either lending their stablecoins on easy apps like Aave or Compound or using simple centralized platforms like Coinbase or Binance that pay rewards for holding or lending them.
The draft bill does permit rewards tied to specific actions like transactions, staking, liquidity provision, or collateral posting. The compromise, championed by Democratic Senator Angela Alsobrooks, attempts to resolve weeks of heated debate between traditional banks and cryptocurrency platforms.
The bill came about because payment stablecoins were blurring the line between traditional banking and unregulated cryptocurrency services. Regulators worried that platforms offering yields on stablecoins were basically functioning as banks without the same oversight, consumer protections, or reserve requirements that traditional financial institutions have to follow. The legislation tries to establish clear rules for this sector while preventing regulatory arbitrage—where crypto platforms could attract deposits by offering returns that banks, bound by stricter regulations, cannot match.
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Banks Versus Crypto Platforms
Banking groups claim the GENIUS Act passed in July 2025 created dangerous loopholes, letting platforms like Coinbase Exchange offer interest-like returns, even though issuers cannot pay direct interest themselves. Crypto firms see it differently—they say this fight already ended during previous negotiations, and banks are just trying to curb competition. Coinbase has threatened to pull its support for the entire bill if Congress pushes restrictions beyond basic disclosure rules.
What Else is in the Bill
The draft also shields software developers from being treated as financial middlemen just because they write code. Thursday’s markup will advance the legislation, though it sidesteps questions about President Trump’s family cryptocurrency businesses.
The bill still needs committee approval, reconciliation with other versions, and passage through both congressional chambers. Nobody knows if it can survive the tug-of-war between banks demanding tighter restrictions and crypto platforms ready to bail. What happens next will determine not just who can earn what on stablecoins, but how much room digital money gets in the American financial system.
