Analyst Seiberg Sees Only 10% Probability for Stablecoin Yield Ban in Next Two Years

Banks are set to make another attempt at preventing crypto platforms from offering yield on stablecoin balances, but Jaret Seiberg, a Washington analyst at TD Cowen, assigns just a 10% probability to Congress passing such a prohibition in the next two years, as he wrote in a Monday policy note.

At the heart of the matter is whether exchanges and similar platforms may grant yields or rewards to investors holding dollar-pegged stablecoins on their systems. Seiberg considers legislative action improbable, yet he identifies what he calls a "narrow path" for a ban.

His reasoning is as much procedural as political: securing 60 Senate votes for a standalone stablecoin yield ban might be simpler than for the wider crypto market structure bill, which lost a cloture vote 49-50 on Sept. 15 and which he had declared effectively dead for this Congress after the Democratic midterm victories.

According to Seiberg, a ban would benefit banks. He expects banking interests to revive their campaign in the next Congress, believing Democratic gains have created an opening.

Why Seiberg still envisions a path

The path depends on a shift in the Senate's composition. Prominent crypto supporters have retired or been defeated, while skeptics are gaining influence. Senator Elizabeth Warren is likely to chair the Banking Committee, and Senator Sherrod Brown, a persistent industry critic, retook his Ohio seat despite approximately $64 million in crypto-aligned spending aimed at unseating him, Seiberg wrote before the votes were counted.

This scenario is not his baseline expectation. He described crypto politics as "complex," explaining that is why the probability begins at 10%.

Certain Democrats will oppose addressing stablecoin yield in isolation from a larger legislative package. Seiberg once more finds no route for the Clarity Act, contending that Democrats will demand ethics and investor-protection measures that President Trump would veto. This division, he wrote, makes Democratic unity on a yield-only bill improbable.

Furthermore, Democrats are internally divided on the issue. Senator Angela Alsobrooks, a key Democratic figure on crypto policy, has supported rewarding stablecoin usage rather than passive holding, a difference that influenced the Tillis-Alsobrooks compromise language in the Clarity discussions.

A perception challenge also exists. Lawmakers would be called upon to deny voters the ability to earn a return on stablecoin holdings when they can already earn returns on savings accounts and money market funds. Seiberg doubts that Democratic leaders would welcome a vote that might be characterized as confiscating money from retail investors.

What the GENIUS Act Prohibits and What It Leaves Unaddressed

This dispute stems from unfinished business under the GENIUS Act, signed by President Trump on July 18, 2025, and designated as Public Law 119-27. The law prohibits regulated and foreign payment stablecoin issuers from providing "any form of interest or yield" solely for holding, using, or retaining a payment stablecoin.

The law does not expressly address exchanges and other intermediary platforms. Banks label this omission a loophole. The American Bankers Association, along with state bankers associations, called on Congress late last year to classify platform rewards as prohibited interest. Subsequently, the ABA and the Independent Community Bankers of America pushed the Senate to stiffen the Clarity bill's language concerning rewards based on balance or holding duration. ICBA has cautioned that stablecoins offering yields could siphon deposits from community banks and reduce local lending.

Stablecoins serve as the primary trading pair for bitcoin on most exchanges, meaning the yield debate affects how bitcoin markets settle and how platforms draw dollar deposits. The Office of the Comptroller of the Currency's final GENIUS regulations, which took effect in January 2027, left the issue of third-party rewards to be decided on a case-by-case basis, disappointing banks that had hoped the agency would resolve it.

House Democrats are already drafting their own market structure proposal, giving the SEC a larger role. Seiberg's note characterizes a narrow ban on yield as the sole bank priority that could still secure 60 votes even if the Clarity Act does not.

The probability is not zero, Seiberg wrote, because community banks are skilled at making the case that stablecoin yields divert funds from banks and impair local lending, and small banks have a track record of prompting congressional action. Still, he remains skeptical.

The question for the upcoming Congress is whether banks can isolate the yield issue from the larger crypto debate, or whether Democratic divisions and the optics regarding retail investors will leave the probability at the level Seiberg assigned on Monday: 10%.