The GENIUS Act should be interpreted as banning all products offering yield from stablecoins, according to feedback submitted to the Treasury by a collective of organizations representing bank interests in the United States.
The banks’ top recommendation, contained in a feedback letter dated November 4, reads:
“Implement the GENIUS Act’s prohibition on the payment of interest or yield on payment stablecoins in a manner that is consistent with Congress’s intent that such payments will be broadly prohibited, whether paid directly by an issuer or indirectly by an issuer’s affiliates or partners.”
Despite the framing implying that GENIUS’ provisions already prohibit stablecoin yield, the reference to implementing GENIUS consistent with Congress’s intent is a tip-off that the true legislative picture may not be so clear.
GENIUS’ prohibition on stablecoin yield reads as follows:
“(11) PROHIBITION ON INTEREST – No permitted payment stablecoin issuer or foreign payment stablecoin issuer shall pay the holder of any payment stablecoin any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use or retention of such payment stablecoin.”
This is the only section within GENIUS that addresses stablecoin yield. In plain language, the clause clearly only applied to issuers. It does not apply to the likes of exchanges.
Nonetheless, the banking collective tries to argue that because GENIUS’s terms and definitions are generally broad, this reflects an intent on the part of Congress to similarly prohibit stablecoin yields generally. This is despite the fact that GENIUS’ definition for the terms used in the provision—permitted payment stablecoin issuer and foreign payment stablecoin issuer—are defined clearly and unambiguously.
Rather than focus on those operative definitions, the feedback letter focuses on the use of ancillary terms such as ‘interest,’ which have traditionally been interpreted broadly by the courts. Similarly, it highlights the catch-all ‘or other consideration’ part of the prohibitive clause as evidence that it was intended to apply broadly, too. The banks say that, taken together, Congress clearly intended the provisions to apply broadly.
Reading between the lines, the thrust of the banks’ concerns is that there’s really no good reason to limit the prohibition to issuers only, particularly when the likes of Coinbase (NASDAQ: COIN), while not strictly stablecoin issuers, are central enough to the stablecoin ecosystem that they may as well be. Coinbase, for instance, has revenue-sharing agreements with Circle (NASDAQ: CRCL), which issues prominent stablecoin USDC.
There are more general points made in the feedback letter: that Congress clearly envisioned stablecoins being used to facilitate payments and settlements, whereas allowing non-issuers to offer yield products would still have the effect of shifting the dominant use-case to one of a store-of-value.
The points about Congress’s general intent are sound. Sometimes, looking beyond the words written in legislation, such as to examine the intent of the legislature when drafting it, can be justified, but only where the terms used are ambiguous or otherwise unclear.
In this case, Congress couldn’t have been clearer: the clause is clear about who the prohibition applies to (stablecoin issuers) and what it prohibits (products that offer interest or yield on the stablecoins). If there are cases where looking behind the letter of the law is appropriate, this isn’t one of them. This is especially so considering Congress’ ‘intent’ on digital assets has been as amorphous as it has.
This isn’t to say there aren’t good reasons for amending GENIUS to expand its prohibition to non-issuers. As mentioned above, the banks highlight several key arguments in favor of doing so. However, focusing on intent is a red herring: the legislation, as drafted, couldn’t be clearer. The banks should not be asking the Treasury to reinterpret clear rules: it should be asking Congress to change the law.
That may not be likely. Industry is already balking at the banks’ complaints, which have been circulating for months. Coinbase CEO Brian Armstrong appeared on CNBC and said:
“The real reason they’re bringing this up as an issue is that they’re trying to protect the $180 billion that they made on their payment business.”
Read the letter to the Treasury here.
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Source: https://coingeek.com/banks-genius-act-must-be-interpreted-as-outlawing-stablecoin-yield/
