TLDR
- Banks and crypto firms failed to reach a resolution on stablecoin rewards during a White House meeting.
- Banking representatives presented strict “prohibition principles” outlining their stance on stablecoin rewards.
- A shift occurred when banks allowed for potential exemptions related to transaction-based rewards.
- Crypto representatives pushed for broader definitions of permissible activities for stablecoin rewards.
- Despite disagreements, both sides showed cautious optimism, signaling the possibility of future compromise.
- The White House has urged both parties to reach an agreement by March 1.
A White House meeting on stablecoin rewards and yield ended without a resolution. Despite this, the talks were described as more productive than previous discussions. While no agreement was reached, both sides moved into more specific discussions, signaling some progress.
Banks Propose New Prohibition Principles on Stablecoin Rewards
At the meeting, banking representatives presented a set of “prohibition principles” regarding stablecoin rewards. These principles outlined strict red lines on what the banks would accept. They pushed for a ban on offering any rewards linked to the purchase, use, or possession of stablecoins.
However, one shift occurred when banks allowed for “any proposed exemption” related to transaction-based rewards. This shift was seen as a meaningful concession, as banks had previously refused to discuss exemptions. Despite this, the core debate about what constitutes permissible activities for stablecoin rewards remained unresolved.
Crypto representatives at the meeting advocated for broader definitions of permissible activities. Banks, on the other hand, argued for narrow definitions to minimize risk. The discussion focused on finding a balance between financial innovation and regulatory safety.
Crypto Industry Pushes for Broader Definitions of Permissible Activities
Crypto firms, including Coinbase, Ripple, and Paxos, pushed for a broader understanding of permissible activities. They argued that stablecoin rewards should be allowed within a framework that does not stifle innovation.
Banks expressed concern about stablecoin rewards leading to deposit flight, which could harm local lending. Banking groups insisted that the stablecoin framework must safeguard deposits to protect the financial system. A proposal from banks included a regulatory study on the effect of stablecoins on deposit movement.
Despite disagreements, both sides showed cautious optimism. Ripple’s Chief Legal Officer, Stuart Alderoty, stated, “Compromise is in the air,” signaling some hope for a future deal. The White House has urged both parties to reach an agreement by March 1, but the path forward remains unclear.
