TD Cowen: Banks may lose the battle over stablecoin yields, but the stalemate could jeopardize crypto legislation.

PANews reported on March 4th that, according to The Block, TD Cowen analysis suggests that banks may ultimately lose the battle over stablecoin yields because opposing consumer gains is politically unsustainable. However, if this dispute drags on too long, it could jeopardize the passage of the US crypto market structure bill, the CLARITY Act.

Last week, the OCC released a proposal for the implementation of the GENIUS Act, including a statutory injunction prohibiting issuers from directly paying stablecoin yields and establishing a "rebuttable presumption": if an issuer coordinates with an affiliate to have the latter pay yields to holders, such third-party yield arrangements may be illegal. TD Cowen believes that unless platforms are explicitly prohibited from paying yields, the OCC's approach is unlikely to satisfy banks. The OCC may change its stance after receiving public comments, or issuers and platforms may adjust their contractual structures to circumvent regulations, or platforms could even successfully challenge the rule in court. With the repeal of the Scheffren principle, the OCC's interpretation of the GENIUS Act no longer enjoys judicial respect, and Congress has not explicitly prohibited platforms from paying interest or issuers from paying marketing fees to platforms.