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Banks Take Hard Line on Stablecoin Yields as White House Talks Stall

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Banks Take Hard Line on Stablecoin Yields as White House Talks Stall


Crypto and banks clashed over stablecoin rewards, with no agreement reached ahead of the March 1 deadline.

Banks and crypto executives met again at the White House this week to settle a dispute over stablecoin rewards, but the talks ended without agreement ahead of a March 1 deadline set by the administration.

The standoff centers on whether crypto firms can offer yield on dollar-pegged tokens without draining deposits from traditional banks.

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White House Talks Narrow Gaps But Yield Ban Remains Sticking Point

Details from the closed-door meeting were first shared on X by journalist Eleanor Terrett, who cited banking and crypto sources present in the room. According to her, participants described the session as “productive,” though no compromise was reached.

She added that banking groups arrived with a written set of “yield and interest prohibition principles.” The document argued that payment stablecoins, as outlined in the GENIUS Act, were designed strictly as payment instruments, not interest-bearing products. It also called for a broad ban on “any form of financial or non-financial consideration” tied to holding or using a payment stablecoin.

The handout allows for only extremely limited exemptions and warns against deposit flight that could reduce credit availability for communities. It also proposed civil penalties for violations and strict rules against marketing stablecoins as deposits or FDIC-insured products.

One banking concession, according to Terrett’s sources, was the inclusion of language allowing for “any proposed exemption,” a shift from earlier refusals to discuss carve-outs at all.

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Still, the scope of permissible activities remains disputed, with crypto firms pushing for broader definitions that would let platforms reward users under certain conditions, while banks want those definitions drawn more narrowly.

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The meeting was led by Patrick Witt, executive director of the President’s Crypto Council. Attendees included Coinbase Chief Legal Officer Paul Grewal, Ripple’s Stuart Alderoty, a16z’s Miles Jennings, and representatives from Paxos and the Blockchain Association.

Major banks present included JPMorgan, Goldman Sachs, Bank of America, Citi, Wells Fargo, PNC, and U.S. Bank, along with trade groups such as the American Bankers Association.

Alderoty later wrote on X that “compromise is in the air,” though others described the outcome as unresolved. Further discussions are expected in the coming days, although it is unclear whether another White House meeting will occur before the deadline.

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Deposit Fears Shaping the Broader Legislative Fight

The yield debate is unfolding against a wider push to pass a long-delayed crypto market structure bill. Last week, crypto firms floated concessions, including sharing stablecoin reserves with community banks or allowing them to issue their own tokens, in an effort to ease opposition.

However, banks argue that yield-bearing stablecoins could pull funds from checking and savings accounts, weakening a primary source of lending capital. Analyst Geoff Kendrick warned that stablecoins could draw up to $500 billion in deposits from banks in industrialized nations by 2028.

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Charles Hoskinson confirms deal to onboard LayerZero on Cardano

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Charles Hoskinson confirms deal to onboard LayerZero on Cardano

Input Output CEO and founder Charles Hoskinson announced a deal to get LayerZero ported over to the Cardano blockchain during a keynote speech at Consensus Hong Kong on Thursday.

LayerZero is a blockchain aimed at powering institutional-grade markets that received investment from Citadel Securities on Wednesday.

The announcement comes alongside the rollout of Midnight’s mainnet, which was also revealed on Thursday morning.

Hoskinson, who was comically wearing a McDonalds uniform in a nod to the recent market downturn said: “The industry is not healthy. S*** is getting real. Twitter is a nuclear dumpster fire. Sentiment is at an all time low.”

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But he insisted it was a micro downturn, and “the macro remains bullish.”

“And to prove it, I’m excited to announce our partnership with LayerZero,” he said. “We’re bringing USDCx to Cardano with a launch date set, complete with broad wallet and exchange support. This means stablecoins with true privacy and immutability, powered by zero-knowledge tech. It’s institutional-grade, and it’s happening now — alongside Midnight’s mainnet rollout. Get ready, folks. This changes everything.”

UPDATE (Feb. 12, 2026, 02:21 UTC): Adds additional information and commentary from Charles Hoskinson.

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Paxful To Pay $4M For Moving Funds Tied to Criminal Schemes

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Paxful To Pay $4M For Moving Funds Tied to Criminal Schemes

Peer-to-peer crypto exchange Paxful has been ordered to pay $4 million after admitting it knowingly profited from criminals who used the crypto platform due to its lack of anti-money laundering checks.

The Justice Department said on Wednesday that Paxful was sentenced to pay the fine after pleading guilty in December to conspiring to promote illegal prostitution, knowingly transmitting funds derived from crime, and violating anti-money laundering requirements.

“Paxful profited from moving money for criminals that it attracted by touting its lack of anti-money laundering controls and failure to comply with applicable money-laundering laws, all while knowing that these criminals were engaged in fraud, extortion, prostitution and commercial sex trafficking,” said Andrew Tysen Duva, the assistant attorney general of the Justice Department’s Criminal Division.

Prosecutors said that from January 2017 to September 2019, Paxful facilitated over 26 million trades worth nearly $3 billion in value and collected more than $29.7 million in revenue.

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Source: Criminal Division

The Justice Department said Paxful had agreed that the appropriate criminal penalty was $112.5 million, but prosecutors determined the company didn’t have the ability to pay more than $4 million.

Paxful made millions from illegal prostitution ads

The Justice Department said Paxful marketed itself as a platform that didn’t require customer information and presented fake anti-money laundering policies that it knew “were not implemented or enforced.”

According to prosecutors, one of Paxful’s customers was the classified advertising site Backpage, which authorities shut down due to hosting ads for illegal prostitution.

“Paxful’s founders boasted about the ‘Backpage Effect,’ which enabled the business to grow,” the Justice Department said, adding that Paxful’s collaboration with Backpage and a similar site between 2015 and 2022 saw the crypto platform earn $2.7 million in profits.

Related: Crypto scam mastermind gets 20 years for $73M pig butchering scheme

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Paxful shut down its operations in November and, in a now-deleted blog post in October, said the decision was due to “the lasting impact of historic misconduct by former co-founders Ray Youssef and Artur Schaback prior to 2023, combined with unsustainable operational costs from extensive compliance remediation efforts.”

Youssef said in response to Paxful’s post that the company “should have closed down when I left the company two years ago.”