TD Cowen says banks likely to lose stablecoin yield fight, but prolonged dispute could put crypto bill at risk

The ongoing fight between the crypto and banking industries over stablecoin yield rules could prolong negotiations and put a broader U.S. crypto market structure bill at risk, according to TD Cowen.

"To us, the banks will eventually lose on this issue politically as they are arguing against consumers getting paid money. Yet this fight could extend long enough to put CLARITY [Act] at risk," Jaret Seiberg, managing director at TD Cowen's Washington Research Group, wrote in a Monday note.

Seiberg’s comments follow a proposed rulemaking from the Office of the Comptroller of the Currency, the primary regulator for U.S. national banks, to implement provisions of the GENIUS Act, the stablecoin legislation signed into law last year. The OCC proposal incorporates the GENIUS Act’s statutory ban on issuers directly paying interest or yield on payment stablecoins. It also establishes a rebuttable presumption that third-party yield arrangements may be illegal if issuers coordinate with affiliates or related entities that in turn pay holders for holding the stablecoin, Seiberg noted.

The OCC said it would evaluate other fact patterns on a case-by-case basis and opened a 60-day public comment period following publication in the Federal Register.

Seiberg argued that the OCC’s approach is unlikely to satisfy banks unless there is an explicit ban on platforms paying yield on stablecoins.

He outlined several concerns. First, the OCC could change its view in response to public comment letters, potentially after the CLARITY Act is enacted, creating regulatory uncertainty. Second, issuers and platforms could adjust contractual structures to avoid falling under the OCC’s “presumed illegal” standard, meaning yield payments could continue in some form. Third, platforms could challenge the rule "successfully" in court once finalized.

"With the Chevron doctrine repealed, the OCC does not get deference in interpreting the GENIUS Act. And Congress did not specifically bar platforms from paying interest or issuers from paying marketing fees to platforms. More broadly, if the banks were so confident the issuer ban applied to platforms then they would not be fighting for an additional prohibition," Seiberg wrote.

Stablecoin yield and conflict-of-interest provisions remain central sticking points in negotiations over the broader market structure legislation. On Monday, JPMorgan CEO Jamie Dimon said banks are seeking a “level playing field” with crypto firms, arguing that if stablecoin issuers or platforms effectively pay interest-like rewards, they should be subject to the same regulatory framework as traditional banks.

While a compromise between the banking and crypto industries remains possible, the timing is uncertain.

Separately, JPMorgan analysts said last week that crypto market structure legislation could be approved by mid-year and serve as a positive catalyst for markets in the second half of the year, even as current sentiment remains weak.