Banks are taking tough measures on stablecoin rates as talks in the White House stall

Crypto and banks clashed over stablecoin rewards, with no agreement reached before the March 1 deadline.

Banks and crypto executives met again at the White House this week to settle a dispute over stablecoin rewards, but the talks ended without an agreement before a March 1 government-set deadline.

The impasse centers on whether crypto companies can offer returns on dollar-pegged tokens without tapping deposits from traditional banks.

The White House talks about narrow gaps, but the interest rate ban remains a sticking point

Details of the closed-door meeting followed first shared on X by journalist Eleanor Terrett, who cited banking and crypto sources present in the room. She said participants described the session as “productive,” although no compromise was reached.

She added that banking groups arrived with a written set of “principles of interest and yield prohibition.” The document argued that payments stablecoins, as set out in the GENIUS Act, were strictly intended as payment instruments and not as interest-bearing products. It also called for a broad ban on “any form of financial or non-financial consideration” related to holding or using a stablecoin for payments.

The award allows only extremely limited exemptions and warns of deposit flight that could reduce the availability of credit for communities. It also proposed civil penalties for violations and strict rules against marketing stablecoins as deposits or FDIC-insured products.

One banking concession, according to Terrett’s sources, was the inclusion of language allowing for “any proposed exemption,” a shift from previous refusals to discuss carve-outs at all.

Yet the scope of permitted activities remains contested, with crypto companies pushing for broader definitions that would allow platforms to reward users under certain conditions, while banks want those definitions to be narrowed.

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The meeting was moderated by Patrick Witt, Executive Director of the President’s Crypto Council. Attendees included Coinbase Chief Legal Officer Paul Grewal, Ripple’s Stuart Alderoty, a16z’s Miles Jennings, and representatives from Paxos and the Blockchain Association.

Major banks in attendance included JPMorgan, Goldman Sachs, Bank of America, Citi, Wells Fargo, PNC and US Bank, along with trade groups such as the American Bankers Association.

Alderoty later wrote on X that ‘compromise is in the air’, although others describe the outcome as unresolved. Further discussions are expected in the coming days, although it is unclear whether another White House meeting will take place before the deadline.

Deposit’s fears shape the broader legislative battle

The yield debate is playing out against a broader push to pass a long-delayed crypto market structure bill. Last week, crypto companies made concessions, including sharing stablecoin reserves with community banks or allowing them to issue their own tokens, in an effort to ease opposition.

However, banks argue that yield-bearing stablecoins can drain money from checking and savings accounts, weakening a primary source of credit capital. Analyst Geoff Kendrick warned that stablecoins could absorb up to $500 billion in deposits from banks in industrialized countries by 2028.