Legislative Draft Bars Interest on Idle Stablecoins, Allows Activity Pay

Reading Time: < 1 minute

A draft market structure bill from the US Senate establishes a firm boundary for stablecoin rewards. It outlaws yields on dormant holdings but carves out room for incentives linked to economic activities, outlining the approach ahead of a critical committee vote.

Senate Banking Chair Tim Scott unveiled the updated bipartisan legislation, described as a product of negotiation. The bill aims to resolve a fiercely debated topic following weeks of discussions involving the crypto sector and traditional banks.

The legislation explicitly prohibits digital asset service providers from distributing interest or yield for users who do nothing more than hold payment stablecoins. It does, however, sanction rewards connected to actions such as processing transactions, staking, liquidity provision, or collateralization.

This language mirrors a middle-ground proposal advanced last week by key Democratic negotiator Senator Angela Alsobrooks. Under her framework, exchanges cannot reward static balances but can offer yield when a customer actively uses their stablecoins.