The $6.6 trillion nightmare scenario that has Senate Democrats trying to kill stablecoin yield immediately
Senate Democrats are pushing to eliminate stablecoin yield due to fears of a $6.6 trillion deposit flight from banks.Summary
US Congress is close to establishing federal digital asset rules, but the debate over whether stablecoins can offer yield is stalling the Senate's parallel legislative package. Democratic lawmakers fear that yield-bearing stablecoins could cause massive deposit outflows from community banks, citing stress analyses estimating up to $6.6 trillion in deposits could migrate under permissive yield designs. The core issue is whether stablecoin issuers or their affiliates can pass through short-term Treasury returns to users as rewards, effectively skirting banking regulations, even if the original GENIUS Act prohibits issuers from paying direct interest. Republicans argue restricting yield protects incumbent institutions, while crypto advocates contend restrictions disadvantage stablecoins compared to fintechs. Democrats emphasize that stablecoins' rapid transferability exacerbates the risk of destabilizing local credit markets supported by community banks. Other unresolved issues, including ethics provisions and illicit finance tools, further narrow the legislative runway, potentially delaying a final bill into 2026.
(Source：CryptoSlate)