US Community Bankers Seek Changes to GENIUS Act Over Stablecoin Yield Concerns
A coalition of US group bankers is urging Congress to amend the GENIUS Act, arguing that the regulation comprises a loophole that enables yield-generating stablecoins to compete instantly with conventional financial institution deposits.
Key Takeaways:
- US group bankers are urging Congress to shut what they see as a loophole permitting stablecoin rewards.
- Banks warn that exchange-based incentives tied to stablecoins might drain deposits and weaken native lending.
- Crypto trade teams dispute the claims, arguing tighter guidelines would restrict innovation with out defending financial institution lending.
In a letter sent Monday to the Senate, the Community Bankers Council of the American Bankers Association referred to as on lawmakers to tighten restrictions within the stablecoin framework handed final yr.
The group stated the invoice needs to be clarified to stop stablecoin issuers from not directly providing yield to tokenholders by means of third events.
Community Bankers Say Stablecoin Rewards Undermine GENIUS Act Intent
“Some corporations have exploited a perceived loophole permitting stablecoin issuers to not directly fund funds to stablecoin holders by means of digital asset exchanges and different companions,” the council, which represents greater than 200 group financial institution leaders, wrote.
The GENIUS Act explicitly bars stablecoin issuers from paying curiosity or yield, reflecting lawmakers’ considerations that yield-bearing tokens might draw funds away from insured financial institution financial savings accounts.
Community bankers argue that the intent of that provision is being undermined by crypto platforms that provide rewards tied to stablecoin holdings.
Major exchanges equivalent to Coinbase and Kraken present incentives for customers who maintain sure stablecoins on their platforms, even when the issuers themselves don’t pay yield instantly.
According to the council, that dynamic dangers siphoning deposits from native banks and weakening their means to lend.
“With this exercise, the exception swallows the rule,” the group stated, warning that large-scale deposit outflows might cut back credit score availability for small companies, farmers, college students, and homebuyers in native communities.
The bankers additionally argued that exchanges and affiliated crypto corporations should not outfitted to exchange banks as lenders and don’t provide merchandise backed by federal deposit insurance coverage.
As a outcome, the council requested lawmakers to lengthen the GENIUS Act’s yield ban to associates and companions of stablecoin issuers by means of pending crypto market construction laws.
The letter provides to rising strain from banking teams. The Banking Policy Institute, led by JPMorgan chief govt Jamie Dimon, raised related considerations final yr, warning that unchecked stablecoin incentives might drive trillions of {dollars} out of the standard banking system.
Crypto Groups Reject Bank Claims, Warn Against Tighter Stablecoin Rules
Crypto trade teams have pushed again. The Crypto Council for Innovation and the Blockchain Association beforehand advised lawmakers that fee stablecoins should not used to fund loans and argued that tighter guidelines would curb innovation and restrict client alternative.
In November, Coinbase Global additionally called on the US Treasury Department to guarantee its upcoming guidelines for the GENIUS Act stay devoted to Congress’s authentic intent.
The trade warned that extreme regulation might stifle innovation and undermine US management in crypto.
It additionally clarified that the GENIUS Act’s interest-payment prohibition applies solely to stablecoin issuers, not to exchanges or intermediaries that provide loyalty or rewards applications.
“Treating third‐social gathering rewards or loyalty applications as prohibited ‘curiosity’ would rewrite Congress’s fastidiously drawn traces and battle with the statute’s goal,” Coinbase stated.
The put up US Community Bankers Seek Changes to GENIUS Act Over Stablecoin Yield Concerns appeared first on Cryptonews.
