Crypto Firms Offer Stablecoin‑Reserve Sharing with Community Banks in Bid to Salvage Market‑Structure Bill
Washington, D.C., Feb. 6 — The cryptocurrency industry is advancing a new compromise that would see a portion of stablecoin issuers’ collateral deposited with U.S. community banks. The proposal, first reported by Bloomberg, is intended to address lingering concerns from traditional lenders and keep the contentious digital‑asset market‑structure legislation moving through Congress.
Background
The 2025‑2026 “crypto market‑structure” bill, which passed the House last year, seeks to overhaul the regulatory framework governing digital assets. Its progress in the Senate has stalled, largely because banks fear that stablecoins – digital tokens pegged to the U.S. dollar – could siphon deposits away from checking and savings accounts.
In recent weeks, crypto firms have been courting skeptical financial institutions, offering concessions centered on how stablecoins are backed. The latest idea is to require issuers to allocate a share of their reserve assets to community‑bank partners, thereby giving those banks a tangible stake in the stablecoin ecosystem.
What the Proposal Entails
- Reserve Allocation: Issuers would be mandated to hold a defined percentage of their fiat and cash‑equivalent reserves at participating community banks.
- Easier Access for New Issuers: The framework could streamline the process for new entrants to launch dollar‑pegged tokens, provided they comply with the reserve‑sharing requirement.
- Potential Incentive Alignment: By placing reserves on bank books, the industry hopes to allay fears that stablecoins will drain deposits from the traditional banking system.
The plan is still in the discussion stage; no formal agreement has been reached between the two sides, and regulators have not yet indicated whether the proposal satisfies the Treasury’s or the Federal Reserve’s safeguards.
Industry Reaction
Not all cryptocurrency firms are on board with the suggested concessions. A notable point of contention is whether platforms such as Coinbase should continue offering “rewards” for holding stablecoins—a practice that banks argue could lure customers away from traditional deposit products. Some crypto companies worry that the reserve‑sharing requirement could impose operational burdens and limit flexibility in managing their collateral.
Legislative Context
The White House convened a meeting on Monday between representatives of the crypto sector and banking trade groups, but the session concluded without a definitive path forward. Senate Banking Committee Chairman Tim Scott told Fox News that a middle ground remains possible:
“We can protect consumers and community banks while still allowing innovation and competition to lower prices and expand access,” Scott said. “Both sides are working toward a compromise that keeps innovation here in America.”
His remarks echo a broader congressional sentiment that preserving the bill’s momentum may require creative compromises that balance regulatory oversight with market innovation.
Analyst Perspective
Research analyst Geoff Kendrick has warned that, if left unchecked, stablecoins could precipitate a shift of as much as $500 billion in deposits out of the banking system across developed economies by the close of 2028. His forecast underscores the urgency felt by banks to secure a role in the burgeoning digital‑dollar market, whose total circulating supply has risen roughly 40 % over the past year to near $300 billion.
Key Takeaways
- Reserve‑Sharing Proposal: Crypto issuers may be required to keep part of their stablecoin reserves at community banks, aiming to give banks a direct interest in the assets that underpin digital dollars.
- Regulatory Impasse Remains: Neither side has accepted the terms; the Senate’s market‑structure bill continues to face delays.
- Bank Concerns Over Deposits: Traditional banks fear that stablecoin incentives could accelerate deposit outflows, prompting them to seek protective measures.
- Industry Division: While some firms view reserve‑sharing as a constructive step, others resist additional constraints on how they manage collateral and reward programs.
- Potential Impact: If enacted, the arrangement could create a new hybrid model where community banks serve as custodians of stablecoin reserves, potentially bridging the gap between legacy finance and the crypto ecosystem.
Outlook
The proposal marks the latest effort by the cryptocurrency industry to align its growth trajectory with the expectations of regulators and traditional financiers. Whether reserve‑sharing will be sufficient to quell banking sector anxieties—and unlock the stalled market‑structure bill—remains to be seen. Stakeholders on both sides will likely continue negotiations throughout the coming weeks, with the Senate’s calendar and forthcoming hearings setting the pace for any final agreement.
Source: https://cryptopotato.com/crypto-industry-proposes-sharing-stablecoin-reserves-with-community-banks-report/
