The White House is proposing a daily fine of $500,000 for revenue evasion

White House draft rules suggest the daily fines could pile up quickly, indicating regulators don’t want loopholes in stablecoin reward designs.

The White House is promoting strict regulatory measures that prohibit offering returns or interest on payment stablecoins.

Proposed enforcement provisions include civil penalties of $500,000 per violation, intended to prevent companies from structuring products that resemble yield farming on stablecoin balances.

Proposal for a stable currency interest rate bank

Details of the government’s third ongoing meeting with crypto industry leaders and banking representatives were shared by journalist Eleanor Terrett via social media.

She reported that the latest session was smaller than the previous week’s and included representatives from Coinbase, Ripple and a16z, along with trade groups such as the Blockchain Association and the Crypto Council. However, no individual representatives from the banks were present; instead, the sector was represented through trade associations.

During the meeting, Patrick Witt, executive director of the White House Crypto Council, presented a draft text that became the main focus. The wording acknowledged the concerns raised by financial institutions in last week’s “Yield and Interest Prohibition Principles” document, while clarifying that any restrictions on rewards would be limited in scope.

At current rates, earning returns on inactive stablecoin balances appears to be off the table, with discussions now focusing on whether companies can offer rewards tied to certain user activities.

One participant on the crypto side told Terrett that bank concerns appear to be driven more by competitive pressures than deposit risks. A bank-side source said trade groups are still pushing for a deposit outflow study to be included in the proposal to explore how the growth of stablecoins for payments could impact these transactions.

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The same person added that the proposed anti-circumvention language would give enforcement authority to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). This provision includes civil penalties of $500,000 per violation per day for companies that attempt to circumvent restrictions on paying returns on unused balances.

The discussions continue as the industry looks for a compromise

The crypto journalist said public statements from attendees are again described as “productive” and “constructive.” People familiar with the matter noted that there was a noticeable difference in this round of talks, with the White House taking the lead in guiding the discussion rather than allowing crypto companies and banking trade groups to drive the conversation.

The latest meeting follows two previous meetings where officials and industry participants debated whether the digital assets should offer returns, the possible effects on bank deposits and broader concerns about competitiveness and innovation if such limits were introduced.

Banking trade groups are now expected to update their members on the latest developments and assess whether there is room for compromise on allowing crypto companies to offer stablecoin rewards. One person also said a timeline for progress by the end of the month appears realistic, with negotiations set to continue in the coming days.