Stablecoin Yield Farming Expected to be Banned, Crypto Legislation Suffers Another Setback

February 20th Crypto journalist Eleanor Terrett reported that this morning’s third meeting on the stablecoin yield provision of the “Crypto Market Structure Bill” (aka the CLARITY Act) was smaller in scale than last week’s session. Attendees included reps from Coinbase, Ripple, a16z, and the crypto industry association—no separate banking representatives were present, as the banking sector’s views were conveyed via the industry group. Notably, the meeting differed from prior sessions: the White House led discussions, rather than letting crypto firms and banks take the lead as in past talks. Patrick Witt, Executive Director of the White House Cryptocurrency Council, put a draft text at the center of debates. The draft acknowledged banks’ concerns from last week’s “Revenue and Interest Prohibition Principle” document, while clarifying that **in stablecoin legislation (a key crypto industry goal), earning yield on idle stablecoin balances will be prohibited (such yield is effectively off the table). The debate now centers on whether crypto companies can offer stablecoin rewards tied to specific activities.** Banking concerns appear to stem more from competitive pressures than the initial perceived risk of deposit outflows. Bank sources noted they’re still pushing to include a deposit outflow study in the draft, which would examine stablecoin payment growth and its potential impact on bank deposits. Additionally, the banking industry is encouraged by the proposed anti-tax evasion provision: it would grant the SEC, Treasury Department, and CFTC authority to enforce the idle balance yield ban and impose a $500,000 civil penalty per violation per day. Sources stated a resolution by the end of the month is possible, with negotiations continuing in the coming days.