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TD Cowen Gives Stablecoin Yield Ban 10% Odds as Banks Plan Push in Democrat-Led Congress
Banks will try again to stop crypto platforms from paying yield on stablecoin balances, but TD Cowen’s Washington analyst Jaret Seiberg puts only a 10% chance on Congress enacting such a ban over the next two years, he wrote in a Monday policy note shared with Bitcoin Magazine and clients.
The issue is whether exchanges and other platforms can offer yield or rewards to investors who keep dollar-pegged stablecoins on their platforms. Seiberg views action as unlikely, though he sees a “narrow path” for a ban.
His rationale is procedural as much as political: it may be easier to find 60 Senate votes on stablecoin yield alone than on the broader crypto market structure bill, which failed a cloture vote 49-50 on Sept. 15 and which he already called effectively dead for this Congress after the Democratic midterm sweep.
A ban, he wrote, would benefit banks. He expects them to renew the push in the next Congress on the theory that Democratic wins open a path.
Why Seiberg still sees a path
That path rests on a shift in the Senate. Key crypto advocates retired or lost, while skeptics are being elevated. Sen. Elizabeth Warren is likely to chair the Banking Committee, and Sen. Sherrod Brown, a longtime critic of the industry, regained his Ohio seat after crypto-backed spending of about $64 million failed to stop him, Seiberg wrote before the votes were counted.
It is not his base case. Crypto politics are “complex,” he wrote, which is why the probability starts at 10%.
Some Democrats will resist treating stablecoin yield outside a broader package. Seiberg again sees no path for the Clarity Act, arguing Democrats will insist on ethics and investor-protection provisions President Trump would reject. That split, he wrote, makes Democrats unlikely to unite behind a yield-only bill.
Democrats are not united on the substance either. Sen. Angela Alsobrooks, a lead Democrat on crypto policy, has backed paying rewards for using stablecoins rather than for passively holding them, a distinction that shaped the Tillis-Alsobrooks compromise text during Clarity talks.
There is also a perception problem. Congress would be asked to stop voters from earning a return on stablecoin holdings even though they can earn one on savings accounts and money market funds. Seiberg questions whether Democratic leaders want a vote that could be framed as taking money from retail investors.
What GENIUS already banned, and what it left open
The fight is leftover business from the GENIUS Act, which President Trump signed on July 18, 2025, as Public Law 119-27. The statute bars permitted and foreign payment stablecoin issuers from paying “any form of interest or yield” solely for holding, using or retaining a payment stablecoin.
It does not explicitly cover exchanges and other intermediaries. That gap is what banks call the loophole. The American Bankers Association and state bankers associations urged Congress late last year to treat platform rewards as banned interest, and the ABA and Independent Community Bankers of America later pressed the Senate to harden Clarity language against balance- and tenure-based rewards. ICBA has warned that yield-bearing payment stablecoins could pull deposits from community banks and cut local lending.
Stablecoins are the main trading pair for bitcoin on most exchanges, so the yield fight lands on how bitcoin markets settle and how platforms attract dollar balances. The OCC’s final GENIUS rules, effective in January 2027, left the third-party rewards question for case-by-case review after banks had hoped the agency would close it.
House Democrats are already sketching their own market structure approach with a bigger SEC role. Seiberg’s note treats a narrow yield ban as the one bank ask that might still clear 60 votes even if Clarity does not.
The reason the odds are not zero, he wrote, is that community banks are effective at arguing that stablecoin yields pull funds out of banks and hurt local lending, and small banks have a record of getting Congress to act. He remains dubious.
The test for the next Congress is whether banks can peel yield off the broader crypto fight, or whether Democratic splits and the retail-investor optics keep the probability where Seiberg put it Monday: one in ten.
This post TD Cowen Gives Stablecoin Yield Ban 10% Odds as Banks Plan Push in Democrat-Led Congress first appeared on Bitcoin Magazine and is written by Micah Zimmerman.
