TD Cowen's Washington analyst Jaret Seiberg gives a 10% chance that Congress will enact a ban on stablecoin yield over the next two years. According to Seiberg, banks will try to push for a ban in the next Congress, but the odds are low due to Democratic splits and the potential perception that such a ban would hurt retail investors. The issue at hand is whether exchanges and platforms can offer yield or rewards to investors who hold dollar-pegged stablecoins.
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The potential ban is a leftover issue from the GENIUS Act, which barred stablecoin issuers from paying interest or yield solely for holding or using a payment stablecoin. However, the law does not explicitly cover exchanges and other intermediaries, leaving a gap that banks are pushing to close. Seiberg notes that community banks are effective at arguing that stablecoin yields pull funds out of banks and hurt local lending, but he remains dubious about the likelihood of a ban.