Senate Stablecoin Bill Hands Banks the Advantage, But Restricts DeFi Growth: CEO
The U.S. Senate’s latest crypto market-structure proposal, which includes a ban on stablecoin issuers paying passive yield to users, could unintentionally drive Americans toward offshore platforms and fully on-chain DeFi while placing new regulatory pressure directly on crypto frontends, according to Eco CEO Ryne Saxe.
Saxe’s comments follow growing concern in the industry that the bill’s “no-interest” stablecoin rule, paired with a narrow exception for “activity-based: rewards, may reshape how both fintech companies and consumers engage with digital dollars.
While the provision is being pitched as a consumer-protection measure, Saxe argues it risks creating more harm than clarity.
“Money tends to find a way, especially as it becomes 10x easier to get on-chain and operate across chains,” Saxe told Ecoinimist via email.
He believes a ban on passive stablecoin yield will push users toward offshore or fully permissionless products, undermining the very consumer protection goals regulators say they want to advance.
Apps, Not Protocols, May Now Become the New Regulatory Target
A central concern in the Senate’s bill is how regulators will treat the user interfaces — the apps, wallets, and frontends — that facilitate retail access to DeFi. Saxe says that while this shift doesn’t surprise builders, it has far-reaching implications.
“Much of the crypto community has assumed this would end up being the case,” he said.
“If you control the UI and own the direct user relationship, you have some obligations that come with that, in terms of taking the right steps to know who they are and why they’re moving money.”
Under this new framework, frontends become the practical chokepoint for stablecoin access, even if the underlying protocols remain decentralized and globally available. Saxe believes companies can still design products that honor privacy and financial autonomy, but they will inevitably face heavier compliance burdens.
Banks Stand to Benefit, and Retail Fintech Loses Most
The ban on stablecoin yield has been framed by some policymakers as a win for financial stability. But Saxe says it functions more like a structural advantage for banks, who retain deposit stickiness while innovative fintech models lose their edge.
“They maintain a competitive advantage through the artificial limitation of what stablecoins are able to do,” he said. “Any additional friction or switching cost to access new technology works in banks’ favor, because inertia (psychological and process-wise) is so high to move money out of your bank account.”
In Saxe’s view, the measure does not meaningfully advance consumer protection. Instead, it entrenches the divide between regulated institutions and permissionless blockchain rails.
A Borderless Liquidity Market Makes the Ban Difficult to Enforce
Even if the U.S. implements a ban on passive stablecoin yield, global liquidity markets will continue to operate without geographic boundaries.
DeFi protocols provide returns programmatically, and Saxe believes American restrictions cannot realistically contain these flows.
It’s “not very practical and artificially limits the technology,” he said. The likely outcome is a regulatory standoff between national compliance regimes and the global nature of stablecoin markets.
Innovation Might Move Offshore, But the U.S. Still Has Network Effects
Saxe went on to warn that the U.S. risks falling behind jurisdictions such as Singapore, Hong Kong, and the EU’s MiCA regime, all of which have clearer stablecoin rules.
However, he believes American dominance won’t collapse immediately.
“Maybe but not necessarily,” he said when asked whether innovation will migrate offshore. “Still great network effects here, still many open questions elsewhere.”
‘Activity-Based’ Reward Carve-Out Will Be Easy to Game
One of the most ambiguous parts of the bill is a carve-out that allows issuers to provide rewards for certain “activities.”
While regulators may intend this to limit loopholes, Saxe expects the opposite.
“Definitely, and rather easy,” he said, when asked whether issuers will design reward systems that replicate yield in practice.
