The Breakdown - Market Structure Thaw as Stablecoin Fight Intensifies

Episode Date: January 28, 2026

As Washington digs out from a winter storm, there are signs that the long-stalled crypto market structure bill may be inching forward again, with behind-the-scenes negotiations aiming to revive a bipartisan path in the Senate Agriculture Committee. The episode unpacks the competing narratives around whether talks are truly back on track, the political tradeoffs shaping the next markup, and why stablecoin yield remains the most stubborn blocker. It also looks at how pressure is building from outside Washington, from Coinbase and Bloomberg’s Neil Ferguson pushing back on banking-lobby arguments, to new yield-bearing products from Bitwise and BlackRock that could make parts of the debate obsolete, before closing with a look at how Bitcoin miners’ grid-balancing role showed up during the latest round of extreme winter weather. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/@TheBreakdownBW Subscribe to the newsletter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://blockworks.co/newsletter/thebreakdown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownBW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Tuesday, January 27th, and today we are talking about what appears to potentially be progress on the market structure bill. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to be going to be. bit.ly slash breakdown pod. Well, as Washington gets buried under what is for them a massive six inches

of snow, opinions could be thawing on the market structure bill. Today was supposed to see the bill debated in the Senate Ag Committee's markup hearing, however, that hearing has been postponed until Thursday due to the inclement weather. The Ag Committee is responsible for the parts of the bill that touch crypto commodities and the jurisdiction of the CFTC. This half of the bill is moving along a separate track to the Banking Committee bill, which was nixed by Coinbase the night before the hearing. When we left off with the Ag Committee, there seemed to be a growing divide between Democrats and Republicans on the issues. The hearing had already been postponed once in order to facilitate extra negotiations. But when the draft bill was released last week, it came without a Democrat endorsement, signaling that the hearing would be contested along party lines.

In the following days, Democrats filed numerous amendments including a measure to block the president from profiting from his family's crypto activities. Now, it seems that tensions are simmering down and staff are working behind the scenes in an effort to pass a compromise bill. A Democrat aide speaking with the block said, When we returned, we were kind of taken off guard when in the first week of January, they told us that they had changed their plans, had written a new draft without us, and were planning to market up that Thursday the 15th. The reporting framed the state of negotiations as Democrats seeking to bring Republicans back to the table to work on bipartisan drafting.

The aide added, We have a group of Democrats who are serious about getting a bill done in the committee, and we are all willing to get back to the table with Chair Boosman's team to do that. A spokesperson for the Ag Committee framed the situation slightly differently. there, on the record statement said that there had been months of negotiations, adding, the legislation the committee will mark up on Thursday reflects much of what was discussed and negotiated during that time. There are some issues that the parties have disagreements about. At some point, you must move forward and vote. We have reached that point. The Democrat

aide reinforced how intense the negotiations had been, but expressed a deep respect for the collaborative efforts of the Booseman team. However, that doesn't mean the Democrat senators are willing to waive through the current draft. The aid added, at this point, we're not prepared to mark up a partisan process that blows up the bipartisan work that we've done. We really feel like we're so close to a bipartisan deal and the decision in January to blow up the bipartisan work. We don't know exactly why or how that comes to be a part of the strategy, but I just think that we worked for months on this in a bipartisan way, and there's no reason why we can't just finish it that way, too. In his Monday note, Jared Seberg of T.D. Cowan

gave his lay of the land, writing, we expect Chair John Boosman will make promises to Democrats to change the bill before it goes to the full Senate with the hope of picking up Democratic support. In his view, the companion markup in Senate banking won't come until March or April, which is starting to get down to the wire given the rapidly approaching midterms. Politico added some color to the horse trading surrounding the deal on Monday. They reported that Republican Senator Roger Marshall had agreed not to attach a bill that would limit credit card swipe fees by way of amendment. That bill has been rattling around Washington for some time, and many see it as a massive piece of leverage against the banking lobby.

Politico noted that the unrelated bill would complicate the vote. It enjoys bipartisan support, so it can probably make it over the line as an amendment. However, many Republicans are for the market structure bill but against the swipe fee bill, giving them a far more difficult vote. The White House is also reportedly against the swipe fee bill getting attached. An official told Politico it jeopardized passing market structure, which is the primary goal for the administration. Now, one of the big remaining overhangs is whether the banking lobby will come to the table on a stable coin compromise. Their opposition to stablecoin yield has been one of the largest blockers to getting a deal done, and there's been no sign their position is shifting. In fact, last week, the American Bankers Association listed cracking

down on Stablecoin yield as one of their top priorities for 2026. Still, pressure is rising from all corners. The crypto industry has made their position clear, with Coinbase in particular, scuttling the bill partially because of stablecoin yield. On Monday, Bloomberg published a controversial opinion piece from economic historian Neil Ferguson titled Stablecoins are the future, but banks will survive. Ferguson wrote, No one is surprised when banks and other financial incumbents argue against measures that might promote innovation, but the argument that stablecoins are a source of instability, and interest-bearing ones especially so is a bad one. The opposite is quite likely to be true, as Treasury Secretary

Besson understands. That stablecoins are a new source of demand for all those treasuries he has to sell is only one of the benefits of the Genius Act. The rest of the article walked through the history of money and financial crises with a particular focus on the free banking era. Ferguson noted that the framework under the Genius Act could not be further from the structure of free banking. Free banking in the U.S. was backed by a range of private and state debt, which differed across the banking network. This led to mismatches in collateral quality and therefore the price of different bank notes. In other words, a dollar issued by one bank might be worth 70 cents on the dollar to a bank in another state. Ferguson pointed out that the Genius Act

requires collateral uniformity. Each stablecoin issuer is required to hold full reserves in U.S. treasuries or cash equivalence, meaning that there shouldn't be any situation where stablecoins trade at different values. Tackling the more substantive argument made by the banking lobby, Ferguson dismissed the idea that yield-bearing stablecoins would trigger outflows from the traditional banking system. He noted that yield-bearing stablecoin accounts already exist and they haven't caused the notable outflow. The U.S. also has high-yield savings accounts and money market funds, which also haven't caused deposit outflows. Ferguson argued that established banks offer far more than just yield, providing customers with mortgages or other financial services rather than simply payments. He argued that

bank customers will continue to use large established banks because of the full-service approach which stablecoin issuers can't match. Now, of course, while the banks might fear competition, their objections aren't framed in those terms. They are making a very specific argument to lawmakers that allowing stablecoin yield could destabilize the banking system by removing deposits. Ferguson, like anyone with a brain, oops, sorry did I editorialize there, believes that argument is completely bunk, and from the Bloomberg opinion pages he urges Washington to reject the argument as such. Paul Grewell, the chief legal officer of Coinbase agreed, commenting, no question, is right. There is zero evidence, zero, that stablecoin interest yield or rewards destabilizes the banking

system. There is tons of evidence that they provide real competition to banks. Those are two very different things. Beyond simple stable coin yield accounts, the crypto industry is also rolling out products that could make the entire argument moot. This week, Bitwise announced a new on-chain yield strategy through defy platform morpho. The strategy targets 6% yield by aggregating defy loans into a basket with certain risk parameters known as a vault. The loans are over-collateralized and because this is that collateral can be independently verified by customers. Bitwise is responsible for strategy design and risk management, but customers maintain ownership over the funds they deposit into the vault. For the moment, the strategy is only available to on-chain investors, but you could

easily imagine this kind of strategy being packaged up into a trad-fi instrument and offered as an alternative to a money market fund. BlackRock is also introducing an interesting new product that offers yield on Bitcoin. On Monday, BlackRock filed for a new ETF called Ishare's Bitcoin premium income. The ETF is structured as a covered call strategy tracking Bitcoin Bitcoin price with the yield on top. That means the fund will hold Bitcoin and sell call options against it. If Bitcoin booms, the fund will sacrifice some upside when they're forced to sell Bitcoin at the strike price of the call. However, absent a boom, the call options will expire worthless and the fund will generate yield by selling the calls. The call selling will be actively managed and the

yield will be highly variable based on price fluctuations. This is a well-established strategy and offering it is nothing new. Hedge funds execute this strategy across a wide range of assets and many ETFs package it for retail investors. The novelty isn't even in using Bitcoin as the underlying asset. Many ETFs and other jurisdictions in private markets offer this strategy already. The difference is, of course, an asset manager of the size of BlackRock bringing the product to market at a completely different scale. While some in the industry have concerns, Bitcoin entrepreneur Steven Zim tweeted, BlackRock is quietly building out the same product stack they built for bonds and gold, which turned gold into a $15 trillion asset class. Lastly, one intersection with the crazy winter weather we

had last weekend. With winter storms pounding the U.S. from Texas to Maine, Bitcoin miners stepped up to do their part. Extreme weather conditions saw around 20% of hash rate go offline as miners curtailed activity. The foundry pool, which services multiple large U.S. miners, saw a 60% hash rate drop since Friday. The hash rate drop was significant enough to push block times out from 10 minutes to 12 minutes. Now, this hash rate drop is a demonstration of Bitcoin mining curtailment agreements, which became a key feature of the U.S. mining industry in recent years. Miners voluntarily shut down during unexpected demand surges in exchange for compensation. This ensures that household power use is prioritized during moments of crisis.

Arguably, the presence of Bitcoin miners as flexible load on the grid has made a huge difference during this storm. You might recall the winter of 2021 when Texas experienced a deep freeze that led to massive blackouts across the state. More than 4 million people lost power and the crises led to more than 240 direct and indirect deaths. Since then, the Texas grid has added a huge amount of Bitcoin mining with curtailment agreements as part of the grid hardening strategy. While the storm has seen around a million people lose power across the country, the problems don't seem anywhere near as the Texas grid collapse of 2021. So if you're in the path of the storm and kept power throughout, you might have a Bitcoin minor, at least partially, to thank.

For now that is going to do it for today's breakdown. Appreciate you listening, as always. And until next time, be safe and take care of each other. Peace.