Community bankers ask Senate to close GENIUS Act stablecoin 'loophole'

The American Bankers Association’s Community Bankers Council, representing more than 200 US community bank leaders, wrote on Monday to the Senate urging changes to the GENIUS Act to close what it called a "loophole" that allows yield-generating stablecoins to undercut banks.

The council said the GENIUS Act already bans stablecoin issuers from offering interest or yield to holders, but that "some companies have exploited a perceived loophole allowing stablecoin issuers to indirectly fund payments to stablecoin holders through digital asset exchanges and other partners." It cited rewards offered by exchanges such as Coinbase and Kraken to holders of certain stablecoins.

The request follows a similar August letter from the Banking Policy Institute, led by JPMorgan CEO Jamie Dimon, which argued the same claimed loophole could trigger $6.6 trillion in deposit outflows. Two crypto advocacy groups, the Crypto Council for Innovation and the Blockchain Association, told the Senate Banking Committee that "payment stablecoins are not used to fund loans" and warned the revisions would stifle innovation and consumer choice. The council has asked lawmakers to include the prohibition in crypto market structure legislation that is currently making its way through Congress; whether lawmakers will adopt the changes is not yet known.

Key Topics

Crypto, Community Bankers Council, Genius Act, Stablecoins, Coinbase, Kraken