Administration Proposes Transaction-Based Stablecoin Incentives During Third Industry Meeting
During recent discussions between cryptocurrency firms and banking representatives, White House crypto adviser Patrick Witt shifted focus toward legislation that would permit stablecoin incentives linked exclusively to transaction volume.
According to reports, the White House has steered conversations between cryptocurrency industry representatives and banking lobbyists toward restricting the manner in which stablecoin incentives may be distributed, marking the third gathering between both sectors regarding a comprehensive crypto market structure bill.
On Thursday, representatives from both the cryptocurrency sector and traditional banking institutions convened at the White House for their third discussion in just over two weeks to address stablecoin-related provisions that have created obstacles for the crypto legislation currently under Senate consideration.
While Thursday's session concluded without reaching a definitive agreement, leaders from Coinbase and Ripple indicated that meaningful headway was achieved when one of the administration's cryptocurrency advisers proposed a compromise solution allowing third-party platforms, including exchanges, to provide stablecoin incentives based solely on transaction activity rather than account balances.
"We rolled up our sleeves and went through specific language today," Ripple's chief legal officer, Stuart Alderoty, posted to X on Thursday. Coinbase's legal head, Paul Grewal, said the meeting was "constructive and the tone cooperative."
Blockchain Association CEO Summer Mersinger said the meeting was a "step forward" in resolving issues related to stablecoin rewards and ensuring that crypto market structure legislation is advanced.
This marks the third gathering among the three stakeholder groups, with the initial session taking place on Feb. 2 and a follow-up meeting occurring eight days later on Feb. 10, as Senate lawmakers work to advance legislation that would establish regulatory frameworks for how US authorities will oversee the cryptocurrency sector.
The House of Representatives approved its version of the legislation, known as the CLARITY Act, back in July, though progress has since reached an impasse as the Senate Banking Committee continues to work toward securing sufficient bipartisan backing to advance the measure.
Semafor reporter Eleanor Mueller and journalist Eleanor Terrett both reported that White House crypto adviser Patrick Witt drove the discussion at the latest meeting.
Witt advocated for a proposal that had been previously introduced, which would permit third-party entities to provide stablecoin incentives to users based on their transactions and platform activity, rather than on account balances, with the latter approach representing a major concern for traditional banking institutions.
"Earning yield on idle balances, a key crypto industry goal, is effectively off the table," Terrett said, citing those who attended the meeting. "The debate has narrowed to whether firms can offer rewards linked to certain activities."
Semafor's Mueller reported that the banks will start meeting tomorrow to decide whether to agree to the trade-off, and added that discussions would continue in the coming days.
The Bank Policy Institute, American Bankers Association and Independent Community Bankers of America represented the banking industry, none of which have publicly commented on the latest White House meeting.
Banks fear competitive pressures, not deposit flight risk
Traditional banking organizations have raised concerns that allowing stablecoin incentives would create direct competition with and potentially weaken the existing banking infrastructure, potentially causing customer deposits to migrate from banks to stablecoin platforms.
The US Treasury estimated in April that mass stablecoin adoption could trigger $6.6 trillion in deposit outflows from the banking system.