Stablecoin Yield Ban Sparks Global Competition: Ledger Executive

A potential stablecolin yield ban in the US could hand the competitive advantage to other jurisdictions. That’s according to Takatoshi Shibayama, Asia-Pacific lead at Ledger.

The US Senate is working on crypto legislation. One provision would block third-party platforms from offering stablecoin yields. Banking lobbyists support it. Crypto lobbyists oppose it. The bill is stalled.

Banks don’t want competition. Simple as that.

Shibayama told Cointelegraph the stablecoin yield ban—if enacted—”definitely opens up a conversation” between institutions, issuers, and regulators overseas. Countries like Australia have already given stablecoin issuers regulatory carveouts. Most haven’t allowed yields yet. They’re protecting bank interests.

That could change fast.

“If that were to change in the US, then I think it definitely opens up a lot of conversation between the stablecoin issuers and the regulators to allow yields or rewards to be passed through to their user base,” Shibayama said.

The math is straightforward. US bans yields. Singapore doesn’t. Hong Kong doesn’t. Dubai doesn’t. Capital moves where returns exist.

I’ve seen this playbook before. 2017. China banned crypto exchanges. Trading volume migrated to Hong Kong, Japan, Korea within weeks. Same pattern applies here.

**The Legislative Battle**

The Senate bill aims to outline how regulators police crypto. The stablecoin yield ban provision came from banking lobby pressure. Traditional banks view yield-bearing stablecoins as direct deposit competition.

Why would retail keep $10,000 in a bank account earning 0.5% when USDC could offer 4-5% yields through DeFi protocols? Banks lose deposits. They lobbied hard.

Crypto lobbyists pushed back. The provision stalled the entire bill. No timeline for resolution.

Meanwhile, most stablecoins globally—even outside US jurisdiction—don’t offer yields. They’re avoiding confrontation with banking regulators. “Not providing yields or rewards to their user base just so that they can protect the banks’ interest,” Shibayama noted.

That’s a strategic choice. Not a technical limitation.

**Asia’s Shift: Blockchain Yes, Crypto No**

Shibayama outlined a broader trend in Asian institutional adoption. There’s been what he calls a “decoupling of crypto and the rest of blockchain technology” since last year.

Asian institutions aren’t pursuing Bitcoin or Ethereum exposure. They’re focused on two specific applications: tokenizing financial products and issuing stablecoins.

“The institutions have carefully selected what they want out of this blockchain technology and then leaving crypto—the Bitcoins and Ethereums of the world—out of the conversation,” he said.

Not surprising. Institutions want the efficiency gains—settlement speed, 24/7 markets, programmable money—without volatility or regulatory uncertainty. Tokenized bonds clear in minutes instead of T+2. Stablecoins move cross-border instantly without SWIFT.

DeFi and staking? Off the table for now.

Asset managers are “a little bit different,” according to Shibayama. They’re still exploring crypto products to diversify client offerings. Regulatory requirements around custodians are less strict for asset managers than banks. That creates room to move.

But they’re getting selective. “They’re becoming a lot more selective on how they choose their custody provider,” he added. Translation: the FTX collapse and Celsius implosion raised standards. Institutions now demand proof of reserves, segregated accounts, insurance. The cowboys got filtered out.

**What This Means Globally**

If the US bans third-party stablecoin yields, it won’t kill the product. It exports the opportunity.

Jurisdictions competing for crypto capital—Singapore, UAE, Switzerland, Hong Kong—would likely welcome yield-bearing stablecoins. They’ve already built regulatory frameworks for digital assets. Adding stablecoin yield permissions is a minor policy adjustment.

The incentive is clear: attract billions in stablecoin deposits, the DeFi platforms managing them, and the jobs and tax revenue that follow.

US-based stablecoin issuers like Circle (USDC) face a choice. Comply domestically and cede international yield markets to competitors. Or structure offshore entities to serve non-US users. Tether (USDT) operates with minimal US exposure already.

The data tells a different story than the legislative intent. Banning yields doesn’t protect consumers. It protects bank deposit franchises. Consumers respond by moving capital offshore or into unregulated alternatives.

I’ve traded through enough regulatory arbitrage cycles to know how this ends. Capital is liquid. Regulations are local. The former always finds the path of least resistance.

**What Happens Next**

The Senate bill remains stalled. No clear timeline for when—or if—the stablecoin yield ban provision gets resolved. Crypto lobbyists continue resisting. Banking lobbyists continue pushing.

Whilst the US debates, other jurisdictions are moving. Australia granted stablecoin carveouts. Singapore’s MAS has been consulting on stablecoin frameworks. Hong Kong announced plans to regulate stablecoin issuers in 2024.

The question is whether US policymakers recognize the competitive dynamics before it’s too late. Lock down yields domestically and watch issuance, platform development, and user adoption shift to Asia and the Middle East.

For now, stablecoin issuers globally are watching Washington. If the ban passes, expect regulatory conversations in Sydney, Singapore, and Dubai to accelerate within weeks.

Next legislative session: watch for movement on the Senate crypto bill. That’s when this gets decided.