US Bankers Warn Stablecoin Yield Workarounds Threaten Local Lending
Over 200 community bank leaders, represented by the American Bankers Association’s Community Bankers Council, are urging U.S. senators to close a loophole in stablecoin regulation that allows crypto firms to bypass the GENIUS Act’s ban on stablecoin interest payments. They warn that crypto companies circumvent the law by distributing rewards through affiliated exchanges, risking substantial deposit outflows from traditional banks. This could undermine local lending and threaten up to $6.6 trillion in deposits, according to a recent Treasury report. The council asks Congress to clarify that the prohibition on interest applies to stablecoin issuers’ affiliates and partners as well. While some regulators downplay the risk of rapid deposit flight, crypto industry representatives argue that overly strict rules may drive activity into less regulated channels, and call for clear definitions and comparable regulatory standards for both banks and stablecoin issuers. The stablecoin market currently totals over $312 billion.
