|

Alabama Lawmaker Raises Alarm On GENIUS Act’s Impact On Small Banks

🏦

Alabama State Senator Keith Kelley has warned that the GENIUS Act, signed into legislation on July 18, 2025, may set off a wave of deposit outflows that may damage rural group banks.

According to reports, Kelley set out his considerations in an op-ed for 1819 News, arguing {that a} perceived hole within the legislation may let crypto platforms supply yields or rewards that pull funds away from native lenders.

The warning comes as public remark intervals have already opened on the US Treasury, and regulators are anticipated to write down the foundations that make the brand new legislation operational.

GENIUS Act: Senator Warns Of Deposit Flight

Financial consultants say the fear facilities on how “comparable supervision” will likely be outlined. If overseas or nonbank stablecoin issuers are handled as having comparable oversight when regulators’ guidelines are free, depositors may very well be tempted to shift money to greater returns provided by crypto companies.

One estimate cited by banking teams places potential deposit outflows as high as $6.6 trillion if the legislation is interpreted broadly. That quantity has made small financial institution leaders uneasy. They concern dropping the steady deposits they use to lend to households, farmers, and native companies.

A Rural Banking Crisis In The Making

Many group banks function on skinny margins. They depend on native deposits to underwrite loans for crop seasons, gear purchases, and small retailers.

Based on reviews, Kelley warned that these lifelines may very well be weakened if massive sums transfer to new digital merchandise outdoors the standard banking system.

Farmers and small enterprise house owners have been named as particularly weak, as a result of native lenders typically supply phrases tailor-made to seasonal wants.

GENIUS Act & Regulatory Path Ahead

The GENIUS Act shouldn’t be but in pressure in any operational sense. Implementation will rely on rulemaking by the US Treasury and the Federal Reserve, and people businesses have already requested for public enter on the dangers and anti-money laundering safeguards.

Reports have disclosed that some banking teams and lawmakers need tighter definitions and clearer guardrails earlier than the foundations are finalized. Supporters of the legislation argue it may convey extra readability to stablecoin markets, however opponents say that the small print matter most.

If deposits begin to depart, small banks may very well be compelled to chop again on loans or increase charges to retain prospects. That end result would seemingly shift credit score away from native debtors towards bigger monetary facilities.

Featured picture from Brian Lyman/Alabama Reflector, chart from TradingView

Similar Posts