U.S. Senate updates Market Structure Act: Stablecoin "passive income" halted, reward mechanisms fully tightened

In early 2026, U.S. crypto regulation once again signals clarity. The U.S. Senate recently released an updated draft of the Digital Asset Market Structure Act, clearly delineating the boundaries for stablecoin reward mechanisms: earning yields solely from holding idle stablecoin balances will be prohibited, but incentives linked to actual usage behaviors remain permitted. This stance is seen as a key turning point in the stablecoin regulatory framework.

The draft, introduced by Senate Banking Committee Chairman Tim Scott, is called the “Negotiated Market Structure Act.” The document will be submitted for committee review this Thursday, aiming to address one of the most contentious issues between the crypto industry and the banking system. Over the past few weeks, both sides have engaged in intensive negotiations over the yield attributes of stablecoins.

According to the latest text, digital asset service providers are prohibited from paying any form of interest or passive income to users who only hold payment-type stablecoins. However, if rewards are directly related to trading, staking, liquidity provision, collateralization, or other on-chain activities, they are not included in the ban. This means that the “accounts earning interest just by holding” model will be explicitly excluded from compliance.

This adjustment stems from a bipartisan proposal by Democratic Senator Angela Alsobrooks. She advocates allowing platforms to provide incentives for specific operational behaviors but argues that stablecoin balances themselves should not be equated with banking deposit tools. This approach has now been incorporated into the Senate Banking Committee version of the bill.

Overall, the issue of stablecoin rewards has become a focal point of competition within the U.S. financial system. Banking groups believe that while the 2025 passed GENIUS Act prohibits issuers from directly paying interest, it does not close the loophole for third-party platforms offering interest-like returns, potentially triggering new liquidity risks. Crypto companies counter that this is an attempt by banks to use regulation as a pretext to stifle innovation.

Some industry voices have publicly expressed concerns. Recently, the largest compliant CEX in the U.S. warned that if legislation further tightens reward arrangements—beyond just strengthening disclosure requirements—it may reconsider its support for the Market Structure Act.

In addition to the stablecoin provisions, the new draft also incorporates bipartisan proposals championed by Cynthia Lummis and Ron Wyden, clarifying that software developers and infrastructure providers will not be considered financial intermediaries solely for writing or maintaining code. This is seen as a systemic protection for DeFi and open-source ecosystems.

Legislatively, this revised version is regarded as an important step toward substantive review of the bill. Moving forward, the versions from the Senate Banking and Agriculture Committees will need to be coordinated and integrated with the House-passed Digital Asset Market Transparency Act. The final text must be approved by both chambers and signed by President Trump to become law.

The U.S. stance on stablecoin yield models is shifting from ambiguity to refined regulation, a change that could profoundly impact stablecoin business models, user behaviors, and the competitive landscape between traditional finance and the crypto industry.