Community banks sound alarm on yield-bearing stablecoin loophole in GENIUS
Community bankers urge lawmakers to close a stablecoin loophole that could drain deposits from local banks.Summary
The American Bankers Association's Community Bankers Council sent a letter to the U.S. Senate urging lawmakers to establish clear boundaries for yield-generating stablecoins within the recently passed stablecoin bill, nicknamed GENIUS. Bankers argue that existing gaps could allow crypto firms to offer rewards from yield-bearing programs, potentially diverting billions of dollars in deposits away from community banks, which rely on these funds for local lending to small businesses, farmers, students, and homebuyers. ABA President Rob Nichols warned that exploiting this "loophole" poses real risks to local communities. Conversely, the Blockchain Association argues that prohibiting rewards would weaken competition and that analysis shows no disproportionate deposit outflows due to stablecoin adoption, noting that banks already hold trillions in reserves earning interest at the Federal Reserve instead of being loaned out. The treatment of these stablecoins may be addressed in upcoming Senate legislation to regulate the broader crypto industry.
(Source：The Block)