TD Cowen puts 10% odds on a stablecoin yield ban in Congress

By Nathan Brooks

TD Cowen assigns a 10% probability to Congress passing a stablecoin yield ban, according to a note by Seiberg, who expects banks to renew their effort in the next Congress after Democratic wins opened a potential route.

The bank campaign does not represent his base case. Crypto politics are “complex,” he wrote, which is why the probability starts at 10%, or one in ten. Democrats are divided on the policy, and the yield question remains entangled with a broader market-structure fight.

According to Seiberg, crypto advocates retired or lost races, while skeptics gained influence. Sen. Elizabeth Warren is likely to chair the Banking Committee, and Sen. Sherrod Brown, a longtime industry critic, regained his Ohio seat after about $64 million in crypto-backed spending failed to stop him. Seiberg wrote before the votes were counted.

Democrats also remain divided over the policy itself. Sen. Angela Alsobrooks supports rewards for actively using stablecoins, not for passively holding them. That distinction shaped the Tillis-Alsobrooks compromise text during negotiations over the CLARITY Act.

Yet another obstacle is the treatment of ordinary savers. Savings accounts and money market funds can pay returns, while the proposed rule would prevent stablecoin holders from receiving them. Seiberg questioned whether Democratic leaders want to support a vote that opponents could portray as taking money from retail investors.

Seiberg sees no current path for the CLARITY Act because Democrats are likely to demand ethics and investor-protection provisions that President Trump would reject. Those demands make a stand-alone yield bill less likely, though not impossible.

Why do banks want yield banned?

President Trump signed the $GENIUS Act on July 18, 2025, as Public Law 119-27. It prohibits permitted and foreign payment stablecoin issuers from paying “any form of interest or yield” solely because a customer holds, uses or retains a payment stablecoin.

The statute does not explicitly cover exchanges and other intermediaries. Banks describe that omission as the loophole they want Congress or regulators to close. The American Bankers Association and state bankers associations urged Congress late last year to treat platform rewards as prohibited interest.

The ABA and Independent Community Bankers of America later pressed the Senate to strengthen CLARITY Act language against rewards based on balances or how long users retain funds. ICBA has warned that yield-bearing payment stablecoins could pull deposits away from community banks, reducing the funds available for local lending.

That is a narrower argument than full-scale crypto legislation. Seiberg treats a yield-only ban as the bank request that might still clear 60 votes even if the CLARITY Act fails. House Democrats are also developing their own market-structure proposal, with a larger role for the Securities and Exchange Commission.

What does this change for crypto market operators?

Stablecoins serve as the main trading pair for bitcoin on most exchanges. The yield fight therefore reaches beyond issuer funding into bitcoin settlement and the dollar balances platforms use to attract users.

For crypto market operators, the practical question is what changes for exchange reward programs: whether platforms can pay for balances or usage under rules that the $GENIUS Act does not explicitly cover, and whether regulators will treat those payments as prohibited yield. The unresolved answer leaves platform programs exposed to different interpretations of issuer restrictions and future agency review.

The Office of the Comptroller of the Currency (OCC) does not yet resolve the issue. Its final $GENIUS rules, effective in January 2027, leave third-party rewards subject to case-by-case review after banks had hoped the agency would close the gap.

Can banks isolate yield from the wider fight?

Seiberg’s case for keeping the odds above zero rests on community banks’ record of pressing Congress when they frame stablecoin yields as a threat to deposit gathering and local lending. The unresolved test is whether that coalition can peel yield out of the broader crypto fight before Democratic splits and retail-investor optics anchor the probability at one in ten.

The next Congress therefore faces a defined choice: advance a narrow yield rule, leave third-party rewards to the OCC’s January 2027 case-by-case regime, or fold the issue into a wider market-structure bill. That choice will determine whether banks can turn deposit protection into a legislative mandate before the OCC rules take effect.