Stablecoins: Payment Tool or Investment Fund? The Regulatory Debate in Washington

The conflict over the nature of stablecoins intensifies in Washington. While the cryptocurrency industry seeks to expand the functionalities of these assets, the traditional banking sector demands regulatory clarity. What are stablecoins and how should they be regulated? This central issue divides lawmakers, banks, and tech companies in a debate that will shape the future of digital payments.

Understanding Stablecoins: The Yield Question

Stablecoins represent cryptographic tokens designed to maintain a stable value, usually pegged to the US dollar. Originally conceived as tools for more efficient money transfers, they are now undergoing a transformation: some issuers want to add yields to these digital currencies.

This change of purpose has raised concerns in the traditional financial sector. What was once simply a payment mechanism is evolving to function as an investment product — a transition that raises fundamental questions about regulatory oversight and consumer protection.

Banks Demand Clear Regulation and Role Distinction

The American banking sector is unwilling to accept this duality without oversight. The position is clear: stablecoins should choose a single function and accept corresponding regulations.

“If they truly want to pay interest on this, then they should go through the same regulatory process,” argues the banking sector perspective. Banks point out that remaining in regulatory shadows — acting simultaneously as a payment method and as an investment — would create unfair competitive disadvantages.

The comparison is straightforward: when a stablecoin begins offering yields, it resembles a money market fund, a heavily regulated financial product. Why should stablecoins escape the same regulatory obligations?

GENIUS Act and Clarity Act: The Legislative Framework

The legislative debate revolves around two specific bills. The GENIUS Act established prohibitions on paying interest in stablecoins but left ambiguities regarding rewards and other yield mechanisms.

The Clarity Act emerges as an attempt to correct these terminological gaps, specifying exactly what constitutes “prohibited interest” and what would be permitted. Lawmakers continue negotiating these terms while the cryptocurrency industry pressures for greater flexibility.

A legislative markup planned by the Senate Banking Committee was recently postponed, particularly after Coinbase withdrew its support for the bill. The company cited provisions that could harm consumers and create unnecessary competitive barriers.

The Crypto Industry Clash: Pressure for Innovation

The cryptocurrency industry resists the binary logic proposed by banks. It argues that stablecoins innovate precisely because they combine security (like fiat currencies) with access to yields (like investments). Rigid restrictions would stifle this capability.

The industry’s lobbying power is significant in Washington. “The cryptocurrency industry has great influence, insisting it can do everything,” say analysts. Tensions will persist as regulators try to balance innovation with systemic protection.

The PNC Bank Precedent: Cautious Engagement

PNC Bank, one of the largest banks in the US, has already tested this terrain. In 2021, it partnered with Coinbase to explore blockchain-based payments and digital asset infrastructure for institutional clients. Still, the bank deliberately avoided offering direct crypto products to retail markets.

This approach reflects the strategy adopted by many traditional banks: participating in blockchain innovation while maintaining distance from direct exposure to volatile cryptocurrencies.

The Road Ahead: Stablecoins in Regulatory Limbo

The future of stablecoins will crucially depend on how lawmakers resolve this fundamental tension. Will they require clear segregation between payments and investments? Will they allow hybrid models with increased regulation? Will they favor the crypto industry or the banking system?

Meanwhile, stablecoins continue to operate in a regulatory gray area. What are they, after all, from a legal perspective? The answer will determine their role in the global financial infrastructure in the coming years.