A heated debate is intensifying between the crypto industry and traditional banking over the nature and regulation of stablecoin rewards. This conflict was recently brought to the forefront by controversial comments from Federal Reserve Governor Christopher Waller.
Fed Governor Waller's Stance on Stablecoin Yields
Governor Waller stirred significant controversy by asserting that payment stablecoins are a form of currency. As such, he believes they should not accrue interest like traditional bank accounts. He criticized issuers for utilizing exchanges as a "backdoor" to offer yields on stablecoins. Waller argued that stablecoins are not meant to be held for their yield, stating, "If Congress wanted you to pay interest, they’d just let you pay interest." Furthermore, he expressed a belief that stablecoins cannot fundamentally "disintermediate the banking system" due to inherent structural limitations. Waller later clarified that these were his personal opinions, with Congress holding the ultimate authority on such matters.
Industry Backlash and the Legislative Divide
Waller's comments drew sharp criticism from crypto leaders, who labeled his stance as pro-banking, outdated, and detrimental to financial innovation and inclusion. They argued that such views serve to protect the established banking system, which has faced its own past failures. Conversely, the traditional banking sector has actively lobbied Congress. They seek to amend legislation like the GENIUS Act to block what they call "loopholes" that allow stablecoin rewards. Banks fear this competition will lead to capital flight from their system and disrupt essential loan services. This ongoing legislative gridlock highlights a broader, persistent conflict between the two industries, potentially extending for years. Amidst this friction, the stablecoin market continues its significant growth, with much of it coming from yield-bearing assets like PayPal USD. Some voices, including former World Bank President David Malpass, advocate for collaboration and innovation-friendly policies for the U.S. to lead in the evolving stablecoin landscape.
