Cosmic Penalties: $500k a Day to Stop Stablecoin Yield?

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The administration has proposed rules so stern they could scare the stars into filing an insurance claim. In short, you may not earn yield or interest on payment stablecoins-because apparently the universe is an accountant and the universe hates compound interest with a passion usually reserved for overdue library books.

Enforcement provisions would slap civil penalties of $500,000 per violation, a sum large enough to make a small planet blink. The aim is to stop firms from conjuring up yield farming on stablecoin balances, which is a bit like discovering someone has been charging tolls on a moon you didn’t know you owned.

Stablecoin Yield Bank Proposal

Details from the administration’s third round of tête-à-têtes with crypto types and banking people were delivered to the public by journalist Eleanor Terrett via social media, which is basically the cosmos shouting into a loudspeaker and hoping someone important notices.

She reported that the session was smaller than the previous week’s encore and included representatives from Coinbase, Ripple, and a16z, along with trade groups such as the Blockchain Association and the Crypto Council. No individual bankers attended in person; the sector was represented by its trade associations, which is a bit like sending your entire choir to sing from the balcony while the soloist remains backstage with the piano tuner.

During the gathering, White House Crypto Council Executive Director Patrick Witt presented a draft text that became the main focus. The language nodded to concerns raised by financial institutions in last week’s “Yield and Interest Prohibitions Principles” document, while making it clear that any restrictions on rewards would be narrow in scope-which is bureaucratic shorthand for “we’re not banning fun, just precise kinds of it.”

Under the current direction, earning yield on idle stablecoin balances appears to be off the table, with discussions now centering on whether firms can offer rewards tied to certain user activities. In other words, you can be rewarded for clicking a few icons, so long as those rewards don’t resemble yield farming too closely, which is cheerfully paradoxical in the manner of a propeller hat on a comet.

One crypto-side attendee told Terrett that bank concerns seem driven more by competitive pressure than deposit risk. A bank-side source added that trade groups are still pushing to include a deposit outflow study to examine how the growth of payment stablecoins could affect these transactions-because nothing says “stability” like an exam about outflows written by people who own calculators with their initials in gold leaf.

The same individual added that the proposed anti-evasion language would grant enforcement authority to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The provision includes civil penalties of $500,000 per violation per day for firms attempting to bypass restrictions on paying yield on idle balances-an amount that would make even the most stubborn hyperactive spreadsheet blink in disbelief.

Discussions Continue as Industry Looks for Compromise

The crypto journalist noted that statements from attendees were again described as “productive” and “constructive.” People familiar with the matter observed a distinct change: this time the White House is steering the ship rather than letting the crypto crew and banking trade groups steer it into a friendly asteroid field. In other words, the conversation now has a captain, even if the captain is wearing a tie that seems to have a tilt in the wrong direction.

The latest meeting follows two earlier ones in which officials and industry participants debated whether digital assets should be allowed to offer yield, the potential effects on bank deposits, and broader concerns about competitiveness and innovation if such limits are imposed. The cosmos, it would appear, remains gently battier than a Vogon poetry reading when it comes to regulatory certainty.

Bank trade groups are now expected to brief their members on the latest developments and assess whether there is room for compromise on allowing crypto firms to offer stablecoin rewards. One person suggested that an end-of-month timeline for progress seems realistic, with negotiations set to continue in the days ahead-because nothing says urgency like a calendar with more stamps than a space station’s airlock.

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2026-02-20 16:39