USDT’s Regulatory Crossroads: Senate Bill Threatens Passive Rewards, Spurs Banking Integration Debate

A pivotal draft bill from the U.S. Senate Banking Committee, spearheaded by Chairman Tim Scott, is set to ignite a fierce debate over the future of stablecoins like USDT. The proposed legislation aims to fundamentally reshape the regulatory landscape by drawing a sharp line between permissible and prohibited reward mechanisms. Crucially, the bill seeks to explicitly ban interest payments generated solely from the passive holding of a stablecoin. This MOVE directly targets a common practice in decentralized finance (DeFi) where users earn yields on their stablecoin deposits. However, the draft does not outlaw rewards entirely; it carves out an exception for incentives tied to 'specific activities,' such as participating in lending protocols or providing liquidity—actions that constitute a form of economic utility or service within a blockchain ecosystem. This distinction is at the heart of the impending clash, positioning traditional banking interests, which may view passive yields as unregulated competition, against the innovative models of crypto finance. The bill, labeled a 'negotiated market structure bill,' indicates it is the product of behind-the-scenes discussions and is now headed for a contentious markup session. Its passage could force a significant evolution for major stablecoins, potentially pushing USDT and its peers towards deeper integration with regulated banking activities and away from pure speculative yield generation. For bullish practitioners, this represents a double-edged sword: while clearer regulation could legitimize stablecoins and spur institutional adoption, restrictive rules on passive rewards could dampen a key driver of retail demand and DeFi innovation in the short term. The outcome of this debate will be a critical determinant of whether stablecoins primarily function as digital cash or as yield-bearing assets within the future financial system.

U.S. Senate Draft Bill Sparks Debate Over Stablecoin Rewards and Banking Clash

Senators have unveiled a market structure bill that could reshape stablecoin regulations, explicitly prohibiting interest payments tied solely to holding stablecoins while allowing rewards for specific activities. The draft, presented by Banking Committee Chairman Tim Scott, is poised for a contentious markup session this week.

The proposed legislation—dubbed a 'negotiated market structure bill'—has already ignited fierce lobbying from crypto firms and banks. Analysts note the bill attempts to navigate a key tension: how to regulate yield-bearing stablecoin products without stifling innovation in the rapidly evolving digital asset space.

Thursday's committee debate may prove pivotal. Observers suggest the outcome could either legitimize certain DeFi mechanisms or force a fundamental redesign of how stablecoins operate within traditional financial frameworks.

JPMorgan Warns Yield-Bearing Stablecoins Could Undermine Traditional Banking

JPMorgan Chase executives voiced cautious support for blockchain innovation during their Q4 earnings call, while issuing stark warnings about interest-bearing stablecoins. CFO Jeremy Barnum argued these instruments risk creating a parallel banking system—one that replicates deposit-taking functions without equivalent regulatory oversight.

The bank's position aligns with the GENIUS Act's push for stablecoin regulation. Barnum emphasized that yield-paying stablecoins could mirror bank deposits while avoiding capital requirements, liquidity rules, and supervisory scrutiny. This comes as the American Bankers Association lobbies Congress on digital asset legislation.

Market observers note the irony: JPMorgan's own JPM Coin operates within existing frameworks, while decentralized alternatives like DAI or USDC explore yield mechanisms. The debate highlights tensions between innovation and financial stability as stablecoins like Tether (USDT) and USD Coin (USDC) process over $10 trillion annually.

Revolut Stablecoin Payments Surge 156% in 2025 as Digital Dollars Gain Traction

Stablecoin volumes on Revolut skyrocketed to $10.5 billion in 2025, marking a 156% year-over-year increase. The fintech platform's fee-free conversions for USDC and USDT have become a catalyst for mainstream adoption, with blockchain data showing consistent growth rather than speculative spikes.

Analyst Alex Obchakevich notes stablecoin transactions now represent nearly double their 2024 share of Revolut's payment volume. This aligns with sector-wide projections—Bloomberg Intelligence forecasts an 81% compound annual growth rate for stablecoin flows, potentially reaching $56.6 trillion by 2030 as institutional and retail use cases converge.