What Is This Article About?
MEXC reports that Washington is closing in on a resolution to one of the most contentious debates in U.S. crypto policy: whether stablecoin issuers and platforms can legally offer financial rewards to holders. The White House Crypto Council has been mediating between banks and crypto firms since late 2025, and as of late February 2026, both sides are significantly closer to an agreement.
The stakes are high. Resolving the rewards question is widely seen as the key to unlocking broader crypto market structure legislation that has been stalled in the Senate Banking Committee for months.
What Is the Stablecoin Rewards Dispute?
The central question is whether stablecoin issuers can attach yield or rewards to their tokens — effectively paying users for holding them. Two camps have been locked in disagreement:
The Banking Industry's Position
Banks argue that deposit-like returns on stablecoins would drain traditional bank deposits. If consumers can earn competitive yields simply by holding stablecoins on a platform, they may move funds out of bank accounts — undermining banks' funding base and their ability to extend credit.
The Crypto Industry's Position
Crypto firms contend that blanket restrictions on stablecoin rewards would stifle innovation and unfairly favor legacy financial institutions. They argue that reward structures are a natural feature of digital-native assets and should not be categorically prohibited.
The dispute has been a significant bottleneck for the broader CLARITY Act market structure legislation, as lawmakers in the Senate Banking Committee have been unwilling to advance markup discussions until the rewards question is resolved.
What Does the Emerging Compromise Look Like?
White House Crypto Council Executive Director Patrick Witt stated that "the distance between the sides has narrowed significantly" following recent negotiations. The likely contours of a deal include:
What Would Be Prohibited
- Passive yield on dormant balances — rewards simply for holding stablecoins without any associated activity appear to be off the table
What May Remain Permitted
- Activity-based rewards — incentives tied to specific transactions, network participation, or other user actions remain under discussion as a potential middle ground
Regulatory Guardrails
- Federal regulators would gain explicit authority to identify and penalize evasive compensation structures
- Steep financial penalties for violations intended to deter workarounds
Officials are targeting March 1, 2026 as the resolution deadline, suggesting a deal could be imminent.
What Did the SEC Change on Stablecoin Capital Rules?
Separately from the rewards dispute, the SEC quietly updated internal guidance on how broker-dealers can treat stablecoin holdings for regulatory purposes:
- Broker-dealers are now permitted to count high-quality stablecoin holdings toward their regulatory capital requirements
- A 2% haircut applies to these holdings, reflecting a modest risk discount
- The change is expected to encourage greater institutional adoption of stablecoins by making them more useful within existing compliance frameworks
This shift signals a broader regulatory posture that is moving toward integration rather than exclusion of stablecoins within traditional financial infrastructure.
How Could This Affect Senate Crypto Legislation?
The rewards dispute has been the primary sticking point blocking Senate Banking Committee markup of the broader crypto market structure bill. If the White House brokers a deal by its March 1 target:
- Senate Banking Committee discussions could advance to formal markup
- The CLARITY Act — which passed the House in July 2025 and cleared the Senate Agriculture Committee in January 2026 — could gain new momentum in the Senate Banking Committee
- A faster legislative timeline becomes realistic for comprehensive U.S. digital asset market structure rules
The broader implication: the GENIUS Act established the stablecoin issuance framework; the CLARITY Act is the companion legislation that defines market structure. Together, they form the foundation of the U.S. digital asset regulatory architecture — and the rewards resolution is the last major barrier to advancing both.
What Should Financial Institutions Consider?
On Stablecoin Product Design
- Do not build product roadmaps around passive yield on stablecoin holdings — this appears unlikely to survive the final legislative framework
- Evaluate activity-based reward structures as a compliant alternative, pending final rule language
- Monitor the March 1 White House deadline and subsequent Senate Banking Committee signals closely
On Regulatory Capital Strategy
- Broker-dealers should assess how the SEC's updated stablecoin capital guidance affects existing and planned stablecoin positions
- The 2% haircut framework may inform how institutions size stablecoin allocations within their capital planning models
On Legislative Timing
- If the stablecoin rewards dispute resolves on schedule, the CLARITY Act could move faster than previously anticipated — institutions should ensure their market structure readiness plans account for an accelerated timeline
The Coinbax Perspective
The stablecoin rewards debate has always been about something larger than yield: it's about whether stablecoins are deposit substitutes or a genuinely new class of financial instrument. The emerging compromise — permitting activity-based rewards while prohibiting passive yield — is a pragmatic resolution that acknowledges both concerns.
For financial institutions, the more significant development may be the SEC's updated capital guidance. Allowing broker-dealers to count stablecoins toward regulatory capital — even with a haircut — signals that stablecoins are being integrated into the existing financial architecture, not treated as an external threat to it.
The March 1 deadline is worth tracking closely. A deal by that date would likely cascade into Senate Banking Committee action on market structure, potentially making Q1 2026 the most consequential quarter in U.S. crypto policy history.
Frequently Asked Questions
Why has the stablecoin rewards dispute blocked Senate action?
The Senate Banking Committee has been unwilling to advance markup of the broader crypto market structure bill while the rewards question remains unresolved. Banks and crypto firms are key stakeholders whose alignment is seen as necessary for the legislation to move forward.
What is the White House Crypto Council?
The White House Crypto Council, led by Executive Director Patrick Witt, is the administration body coordinating U.S. digital asset policy. It has been the primary mediator in the stablecoin rewards negotiations between banking industry representatives and crypto firms.
What is the difference between passive yield and activity-based rewards?
Passive yield refers to returns earned simply for holding a stablecoin — analogous to deposit interest. Activity-based rewards are tied to specific user actions such as making transactions, participating in a network, or meeting usage thresholds. The compromise under discussion would permit the latter while prohibiting the former.
How does the SEC's capital guidance change affect institutions?
Broker-dealers can now count high-quality stablecoin holdings toward regulatory capital requirements, subject to a 2% haircut. This makes stablecoin holdings more useful within existing compliance frameworks and may encourage institutional adoption without requiring additional regulatory capital buffers.
What happens if the March 1 deadline is missed?
While a missed deadline would not automatically derail the legislation, it would likely delay Senate Banking Committee markup and push comprehensive market structure legislation further into 2026 — with greater exposure to political uncertainty from the midterm election cycle.