What happened: Crypto-related stocks rallied Monday, with shares of Circle Internet Group (CRCL) and Coinbase Global (COIN) climbing 20% and 5%, respectively.
What’s behind the move: Investors are digesting long-awaited stablecoin yield text that’s held up the crypto industry’s key bill in Congress.
Coinbase and Circle share a long-term commercial distribution agreement around the world’s second-largest stablecoin, USDC (USDC-USD), and have for years leaned on interest payouts as a crucial growth driver.
The new text, first reported on by Punchbowl News, means that platforms like Coinbase would be barred from paying customers yield on their idle stablecoin balances. However, the new language still permits the payment of rewards for stablecoins that are used in bona fide transactions. It also allows for liquidity and market-making activities, as well as posting collateral tied to a trade or loan.
Read more: How to start buying crypto with $100
What else you need to know: The outcome may offer customers more incentive to use stablecoins for more daily purchases, TD Cowen analyst Jaret Seiberg wrote in a Monday note, which “could disintermediate banks from consumer finance.” For the same reason, Seiberg isn’t yet convinced the revised rule will stick, noting that banks would be a hurdle to enactment.
Bank industry trade groups later on Monday issued a statement calling for further changes to the rule, saying that this new text “falls short” and leaves room for loopholes.
Since the beginning of this year, the debate over stablecoin yield payments has stood as the biggest obstacle to passing a major crypto market structure bill known as the Clarity Act. However, it’s not the only unresolved matter in the legislation.
With this latest revised language, the next step is for the Senate Banking Committee to schedule a markup hearing for the bill in the coming days, and time is running short.
Seiberg estimates the Senate must pass the bill by late July, meaning after accounting for holidays, the Senate Banking Committee has only “a few weeks” left to push the bill to the floor.
David Hollerith covers the financial sector, ranging from the country’s biggest banks to regional lenders, private equity firms, and the cryptocurrency space.
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