Expanding the stablecoin yield prohibition to include the application layer is an anti-competitive practice, industry advocacy groups say.
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The Blockchain Association, a non-profit crypto advocacy organization, wrote a letter to the US Senate Committee on Banking, signed by over 125 crypto industry groups and companies, opposing the ban on third-party service providers and platforms offering customer rewards to stablecoin holders.
Expanding the prohibition on stablecoin issuers sharing yield directly with customers, outlined in the , to include third-party service providers stifles innovation and leads to “greater market concentration,” the letter .
The letter compared the rewards offered by crypto platforms to those offered by credit card companies, banks and other traditional payment providers.
Prohibiting crypto platforms from offering similar rewards for stablecoins gives an unfair advantage to incumbent financial service providers, the Blockchain Association said.
“The potential benefits of payment stablecoins will not be realized if these types of payments cannot compete on a level playing field with other payment mechanisms. Rewards and incentives are a standard feature of competitive markets.”
The Blockchain Association has issued several statements and pushing back against efforts to prohibit crypto platforms from sharing yield-bearing opportunities with customers, arguing that these rewards help consumers offset inflation.
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The Federal Deposit Insurance Corporation (FDIC), the US regulatory agency that oversees and insures the banking sector, published a on Tuesday that would through subsidiaries.
Under the proposal, both the bank and its stablecoin subsidiary would be subject to FDIC rules and assessments for financial fitness, including reserve requirements.
The Blockchain Association continues to push back on claims that and sharing rewards with customers and bank lending.
“Evidence does not support claims that stablecoin rewards threaten community banks or lending capacity,” the Blockchain Association , adding that it is difficult to make the case that bank lending is actually constrained by customer deposits.
Despite this, the banking industry has and crypto platforms sharing yield with clients over fears that interest offered on digital asset products will .
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