Banks Reportedly Lobby to Revise GENIUS Act Stablecoin Interest Provisions

• Banks claim lobbying protects community bank deposits amid stablecoin growth.

• The GENIUS Act prohibits direct interest from issuers but allows third-party rewards.

• Independent analysis shows no unusual deposit losses; banks earn over 4% on reserves versus 0.01% to savers.

Discover why banks lobby to change the GENIUS Act on stablecoin interest. Uncover the controversy, Coinbase’s red line stance, and implications for crypto regulation. Stay informed—explore key details now!

What is the GENIUS Act and why are banks lobbying to change it?

The GENIUS Act establishes a regulatory framework for stablecoins in the United States, resulting from months of negotiations between banks and issuers. It prohibits stablecoin issuers from paying interest directly to holders but permits platforms and third parties to offer rewards. Banks now seek to reopen this compromise, citing safety and deposit concerns.

Why are banks pushing to reverse the GENIUS Act interest compromise?

Banks assert their efforts stem from safety issues and risks to community bank deposits. However, crypto advocate Max Avery notes independent research reveals no evidence of unusual deposit outflows from community banks. Traditional banks profit significantly by earning over 4% interest on customer deposits at the Federal Reserve, while paying savers around 0.01% on savings accounts. Avery warns that broadening amendments to ban “rewards” could eliminate third-party yield sharing, stifling competition. He questions lawmakers’ silence on stagnant bank savings rates despite Federal Reserve policy shifts over 15 years, as stated in his public commentary on X.

Frequently Asked Questions

What does the GENIUS Act say about stablecoin interest payments?

The GENIUS Act bars stablecoin issuers from directly paying interest to holders, a compromise to balance regulation. It explicitly allows third-party platforms and services to provide rewards or yields, preserving innovation while addressing bank concerns over deposit competition.

Why does Coinbase view GENIUS Act changes as a red line issue?

Coinbase deems reopening the GENIUS Act a red line because it undermines settled legislation after extensive negotiations. CEO Brian Armstrong predicts banks will eventually lobby for stablecoin yields once they see the market potential, labeling current efforts unethical and wasteful amid the innovator’s dilemma.

Key Takeaways

• Compromise at Risk: The GENIUS Act’s interest payment settlement faces reopening, potentially harming stablecoin innovation.
• Profit Protection Claims: Banks cite safety, but data shows no deposit crisis; focus remains on 4% Fed earnings versus low saver rates.
• Industry Unity: Coinbase and groups like the Blockchain Association oppose changes to foster fair competition in U.S. fintech.

Conclusion

The battle over the GENIUS Act highlights tensions between traditional banks and stablecoin issuers, with lobbying efforts targeting the interest payment compromise amid unsubstantiated safety claims. As Coinbase and advocates like Brian Armstrong and Max Avery emphasize, preserving this framework is crucial for competition and innovation. Monitor developments closely, as future stablecoin regulations could reshape U.S. financial markets—position yourself ahead by staying engaged with crypto policy updates.

The GENIUS Act emerged from rigorous Congressional talks to regulate stablecoins responsibly. Its provisions thoughtfully prohibit direct issuer interest while enabling yield programs via platforms. Banks’ push to amend, as noted by Armstrong, ignores the lucrative opportunity stablecoins present, perpetuating the innovator’s dilemma where incumbents resist disruption.

Armstrong’s prediction underscores a potential shift: banks may soon advocate for stablecoin yields upon recognizing demand. Coinbase’s letter, backed by the Blockchain Association, Stand With Crypto, and North American Blockchain Association, signals unified industry resistance. This stance deters fintech entrants wary of unstable rules favoring legacy players.

Avery’s analysis reinforces that community banks face no deposit exodus per available data. Lawmakers must scrutinize bank incentives, where Fed reserve yields far outpace consumer returns. Allowing endless amendments erodes trust in legislative finality, vital for economic growth.

Stablecoins offer efficient, low-cost alternatives, yet bank lobbying risks narrowing access to rewards. Policymakers should prioritize evidence over lobbying narratives to support a competitive landscape. As crypto matures, balanced regulation like the GENIUS Act’s original form drives broader adoption.