Banks Take Hard Line on Stablecoin Yields as White House Talks Stall

Crypto and banks clashed over stablecoin rewards, with no agreement reached ahead of the March 1 deadline.

Banks and crypto executives met again at the White House this week to settle a dispute over stablecoin rewards, but the talks ended without agreement ahead of a March 1 deadline set by the administration.

The standoff centers on whether crypto firms can offer yield on dollar-pegged tokens without draining deposits from traditional banks.

White House Talks Narrow Gaps But Yield Ban Remains Sticking Point

Details from the closed-door meeting were first shared on X by journalist Eleanor Terrett, who cited banking and crypto sources present in the room. According to her, participants described the session as “productive,” though no compromise was reached.

She added that banking groups arrived with a written set of “yield and interest prohibition principles.” The document argued that payment stablecoins, as outlined in the GENIUS Act, were designed strictly as payment instruments, not interest-bearing products. It also called for a broad ban on “any form of financial or non-financial consideration” tied to holding or using a payment stablecoin.

The handout allows for only extremely limited exemptions and warns against deposit flight that could reduce credit availability for communities. It also proposed civil penalties for violations and strict rules against marketing stablecoins as deposits or FDIC-insured products.

One banking concession, according to Terrett’s sources, was the inclusion of language allowing for “any proposed exemption,” a shift from earlier refusals to discuss carve-outs at all.

Still, the scope of permissible activities remains disputed, with crypto firms pushing for broader definitions that would let platforms reward users under certain conditions, while banks want those definitions drawn more narrowly.

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The meeting was led by Patrick Witt, executive director of the President’s Crypto Council. Attendees included Coinbase Chief Legal Officer Paul Grewal, Ripple’s Stuart Alderoty, a16z’s Miles Jennings, and representatives from Paxos and the Blockchain Association.

Major banks present included JPMorgan, Goldman Sachs, Bank of America, Citi, Wells Fargo, PNC, and U.S. Bank, along with trade groups such as the American Bankers Association.

Alderoty later wrote on X that “compromise is in the air,” though others described the outcome as unresolved. Further discussions are expected in the coming days, although it is unclear whether another White House meeting will occur before the deadline.

Deposit Fears Shaping the Broader Legislative Fight

The yield debate is unfolding against a wider push to pass a long-delayed crypto market structure bill. Last week, crypto firms floated concessions, including sharing stablecoin reserves with community banks or allowing them to issue their own tokens, in an effort to ease opposition.

However, banks argue that yield-bearing stablecoins could pull funds from checking and savings accounts, weakening a primary source of lending capital. Analyst Geoff Kendrick warned that stablecoins could draw up to $500 billion in deposits from banks in industrialized nations by 2028.