USDWhite House Crypto Talks Stall on Stablecoin Yield as GENIUS Act Draws State Pushback
Banks, Crypto Firms, and Prosecutors Clash Over Stablecoin Rewards and Consumer Protections
TL;DR
- White House meetings on stablecoin yield and the CLARITY Act ended without agreement amid sharp bank–crypto divisions
- New York Attorney General Letitia James and four district attorneys criticized the GENIUS Act in a formal letter
- Federal engagement intensified through a Trump-hosted crypto summit, with no policy changes announced
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White House officials hosted multiple closed-door engagements with crypto companies, banking groups, and lawmakers during February 2–3, 2026, as disagreements over stablecoin rewards, regulatory authority, and consumer protections remained unresolved. Representatives from Coinbase, crypto trade groups, and banking organizations met with senior administration officials to debate whether yield generated from stablecoin reserves should be permitted and which entities should be allowed to offer it. Banking representatives argued that interest-like rewards should be restricted to regulated deposit-taking institutions, while crypto advocates pushed for recognition of on-chain reward mechanisms distinct from traditional banking products, according to people familiar with the discussions.
Participants from crypto advocacy groups described the White House meeting as “exactly the progress needed,” while acknowledging that the talks exposed deep structural disagreements between the two sides. A source present at the meeting said bank representatives maintained a rigid stance, warning that allowing non-bank stablecoin rewards could undermine financial stability and encourage regulatory arbitrage. The meeting focused on whether third-party platforms or issuers should be permitted to distribute rewards derived from reserve assets, a question central to pending legislative frameworks tied to stablecoin oversight.
White House officials separately attempted to mediate a dispute linked to the CLARITY Act later on February 3, 2026, bringing banks and crypto firms together to address the same yield-related questions. That session concluded without any formal agreement, with participants leaving key issues unresolved, including whether yield-bearing stablecoins should be treated as deposits under federal law. Officials acted as facilitators rather than decision-makers, according to people briefed on the matter, as the disagreement continued to center on definitions of permissible activity under existing and proposed statutes.
Donald Trump hosted a two-hour, behind-the-scenes crypto summit at the White House on February 3, 2026, convening industry executives and Wall Street leaders alongside policymakers. Discussions covered stablecoins, market structure, and the broader U.S. approach to digital assets, according to attendees, though no policy announcements followed the meeting. Industry participants described the summit as a signal of heightened federal engagement with the sector, while noting that uncertainty around stablecoin regulation remained unresolved following the discussions.
State-level opposition to federal stablecoin policy intensified at the same time, led by New York Attorney General Letitia James. A letter sent last week to key Democratic lawmakers and signed by James and four New York district attorneys warned that the Guiding and Establishing National Innovation for U.S. Stablecoins Act leaves fraud victims with limited avenues for restitution. “Since being signed into law, the Genius Act has provided stablecoins and stablecoin issuers the imprimatur of legitimacy, while still allowing issuers to avoid significant regulatory requirements that are needed to combat financing terrorism, drug trafficking, money laundering, and especially cryptocurrency fraud,” the letter stated.
The GENIUS Act, signed into law last year by President Trump, requires stablecoins to be fully backed by U.S. dollars or similarly liquid assets and mandates annual audits for issuers with a market capitalization exceeding $50 billion. New York prosecutors argued those provisions fall short, citing stablecoins’ role in illicit activity and the absence of explicit requirements compelling issuers such as Circle and Tether to return stolen funds. Prosecutors pointed to data estimating that 84% of all illicit crypto transaction volume in 2025 involved stablecoins, according to a cited report.
Federal agencies have entered the implementation phase of the GENIUS Act, drafting rules to operationalize its requirements while facing ongoing criticism from state regulators. White House-facilitated talks during early February underscored the divide between efforts to establish national standards and demands from prosecutors for stronger enforcement mechanisms. Discussions across the meetings ended without consensus, according to people briefed on the sessions, as debates over stablecoin yield, banking competition, and consumer protection remained unresolved.
This article has been refined and enhanced by ChatGPT.
