Senate files again for major crypto bill with stablecoin-rewards compromise, DeFi protections

An updated draft of the U.S. Senate's legislation to regulate crypto reveals some of the important conclusions made on decentralized finance (DeFi) and stablecoin yield, but the circulating document remains silent on other key points, including whether public officials can profit off of crypto businesses while in government.

The document, released within minutes of midnight by Senate Banking Committee Chairman Tim Scott and sending bleary-eyed lobbyists into a new round of scrutiny, is 278 pages and addresses many of the outstanding issues lawmakers were negotiating in the crypto market structure bill. The bill is intended to define how federal agencies like the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission, among others, can oversee the crypto markets.

The latest release overlaps and expands on a document obtained by CoinDesk which circulated among industry stakeholders earlier Monday night and contained a portion of this legislation set for a hearing of the Senate Banking Committee later this week.

The committee plans to consider the bill on Thursday, when lawmakers will debate provisions in the bill, as well as offer amendments. Senators have until Tuesday evening to file amendments they wish to offer. A similar markup hearing in the Senate Agriculture Committee will now take place later this month, after its chair, Senator John Boozman, postponed it. Both committees will need to advance their respective bills before the overall Senate can take a look.

Stablecoin yield

One of the central points of the ongoing negotiations — the question of stablecoin rewards and yield — was finally addressed after weeks of back-and-forth between the crypto industry and the banking lobby.

"In general — A digital asset service provider may not pay any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding of a payment stablecoin," the bill said. This provision does not apply to "activity-based reward[s] or incentive[s]," including transactions. That resembles a compromise floated last week by Democratic Senator Angela Alsobrooks, one of the negotiators on the legislation, who sought to protect the deposit-taking business model of community banks.

A person familiar with the talks said that representatives of one of the chief industry voices on this issue, Coinbase, had seen Alsobrooks' compromise as trying to find a constructive way forward on an issue that had locked up the negotiations.

The bill used the GENIUS Act's definition of "digital asset service provider," which includes exchanges, custodians and issuers.

The bill also does not seem to include any provisions addressing ethics concerns that Democrats on the committee laid out last fall, specifically referencing President Donald Trump and his family's ties to multiple crypto businesses.

Securities regulations

The discussion draft includes provisions addressing how securities are to be regulated by the U.S. Securities and Exchange Commission, illicit finance, decentralized finance, banking and "responsible regulatory innovation."

The bill includes the Senate's "ancillary asset," a term previously introduced in an earlier draft from the Banking Committee. The House of Representatives did not include this term in its own counterpart legislation, meaning it will have to vote on the Senate version or force negotiations between the two houses of Congress.

Another provision said that "network tokens" would not be considered ancillary assets or otherwise deemed securities, and included any digital asset currently part of an exchange-traded fund (ETF). This provision suggests that by default, cryptocurrencies like XRP XRP$1.4043, Solana SOL$84.57 and Chainlink's LINK LINK$8.8055, among others, to be deemed not securities.

DeFi rules

The legislative draft additionally contains a never-seen-before section focusing on DeFi oversight. And though a partial bill document released earlier Monday did not yet include a section on the Blockchain Regulatory Certainty Act introduced by Senators Cynthia Lummis and Ron Wyden earlier Monday, it was included in the final version.

Other developer provisions are also included in the text, which gave DeFi insiders a first impression that the protections may be weaker than in earlier versions but that they hadn't been erased entirely as traditional finance lobbyists had aimed for.

Also on Monday, Senators Jack Reed, Tina Smith and Chris Van Hollen wrote a letter to Committee Chairman Tim Scott earlier Monday, asking for a hearing to debate the bill prior to Thursday's markup.

"If the markup proceeds as scheduled, then Committee Members will have 48 hours to review text and less than 24 hours to prepare amendments before being asked to vote," the letter said. "We should not be asked to cast such a vote without sufficient time to analyze and review the text … This may be the most significant law considered by the Committee this century."

UPDATE (Jan. 13, 05:36 UTC): Adds committee's release of the bill text.