a16z Crypto Policy Head and General Counsel Miles Jennings: No Evidence of Stablecoin Rewards Causing Deposit Outflows

Miles Jennings, a16z's Crypto Policy Head and General Counsel, stated at the SALT conference in Wyoming that there is no evidence of deposit outflows caused by stablecoin rewards, as warned by banks. He mentioned that some banks do not want the Clarity Act to pass. He discussed the path to securing 60 votes, bank lobbying, the inability of SEC actions to provide long-term certainty for founders, and whether the scars from Gensler's tenure still push entrepreneurs out of the U.S.

Bank trade groups have characterized rewards as disguised interest, claiming they would siphon off deposits that support small businesses, mortgages, and farm loans. Six organizations, including the American Bankers Association, the Bank Policy Institute, and the Community Bankers Association, have called for tightening the prohibition on "interest-like" rewards. The GENIUS Act has already prohibited issuers from paying interest directly, and banks are concerned that exchanges and affiliates may circumvent this. Jennings argues that without passing the market structure bill, the current state of GENIUS allows intermediaries to continue paying rewards, effectively accelerating banks' obsolescence; passing it would allow institutions to enter on-chain or even permissionless agreements.

The Senate Banking Committee introduced the Digital Asset Market Clarity Act in May with a vote of 15 to 9, aiming to delineate the responsibilities of the SEC and the Commodity Futures Trading Commission. The majority leader has scheduled a procedural vote around September 15, requiring 60 votes to limit debate. Democrats also want to impose restrictions on crypto interests and enhance anti-money laundering measures. The prediction market once reduced the probability of passing this year to about 22 cents. Meanwhile, Coinbase has partnered with payment companies to provide stablecoin acceptance and settlement to community banks, attempting to break the lobbying power of community banks against larger banks. American Banker magazine commented that reopening the already negotiated rewards could kill the bill, while a failure of the bill would allow broader third-party rewards to continue.

He wrote that SEC case enforcement could flip with a new administration, and founders want a legislative timeline. Stablecoin rewards represent a competition for interest between banks and exchanges, while the 60 votes represent a calendar battle.

The market mechanism is the pricing power of deposits. Buyers are exchanges and VCs that want legislative recognition of on-chain dollars and to preserve reward income; sellers are bank associations that want to lock in low-interest demand deposits. Evidence of funds moving between demand accounts and stablecoin balances is still being debated by both sides. The beneficiaries are platforms that can write activity-based rewards as legal; the pressured parties are community banks that rely on cheap deposits for net interest margins. The event-driven nature is the conference interviews, not just a roll call conclusion.

Without evidence of outflows, lobbying continues to frame it as if outflows are occurring. If the bill fails, rewards may broaden; if the bill passes, rewards may simply be renamed.

Source: Public Information