US banks urge Congress to close GENIUS Act yield gap
Several US banking groups, led by the Bank Policy Institute (BPI), are urging Congress to close a loophole allowing stablecoin issuers to offer yields through affiliates.
The groups warned in a letter that this could undermine the traditional banking system and divert up to $6.6 trillion in deposits.
Under the GENIUS Act, stablecoin issuers are barred from paying yields directly, but the ban does not extend to exchanges or related businesses.
This could enable issuers to bypass the law by offering rewards through partner platforms.
Stablecoin yields are seen as a major draw for users, with some platforms paying holders directly or via exchanges like Coinbase and Kraken.
Bankers fear that widespread adoption of yield-bearing stablecoins would erode banks’ ability to attract deposits needed to fund loans.
The letter, also signed by the American Bankers Association and other trade groups, stressed that stablecoins do not finance loans or invest in securities like bank deposits or money market funds.
They warned that allowing stablecoin yields could increase deposit flight risks, especially during financial stress, raising borrowing costs and reducing loan availability.
The current stablecoin market cap is $280.2 billion, far smaller than the $22 trillion US money supply.
Tether (CRYPTO:USDT) and USD Coin dominate the market with a combined value of $231.4 billion.
The GENIUS Act, signed by President Donald Trump on July 18, aims to strengthen the US dollar’s global role through dollar-pegged stablecoins.
The US Treasury projects the stablecoin market could reach $2 trillion by 2028.
At the time of reporting, Tether price was $0.9999.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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