Alabama Senator warns GENIUS Act could devastate rural banks

An Alabama lawmaker is raising alarms over the GENIUS Act, warning it could threaten the survival of small community banks. State Senator Keith Kelley, representing Calhoun and Talladega Counties, cautions that a loophole in the federal law could devastate rural economies unless Congress moves quickly to fix it. 

According to reports, Kelley stressed that small businesses, family farms, and community banks are the backbone of Alabama towns, and that he’s seen firsthand how strong policies and local support fuel rural growth.

The new law, however, he says, could disrupt that system. The GENIUS Act provides cryptocurrency issuers a legal basis on which to function. This could pull deposits from small banks, Kelley says.

He noted that community banks rely on local deposits to lend to local businesses and families. Kelly said that if people transfer their money into crypto platforms, such deposits would dry up, loans would contract, growth would stagnate, and jobs would be lost.

Kelley adds that there are also fewer security rules for crypto platforms than for banks. They are not insured by the Federal Deposit Insurance Corporation (FDIC). They are still free to lure customers with rewards or incentives that appear to carry high interest. He worries that it could lure customers out of the safety of traditional banks.

GENIUS Act ripple effects hit farms and small towns

The GENIUS Act consequences could be dire, with local banks possibly ending up with fewer deposits, leading to less money to lend. Entrepreneurs may be compelled to defer or abandon new ventures. Farmers can find it challenging to purchase seeds or equipment during lean seasons. Families might find credit harder to come by.

Townwide ripple effect, Kelley said that if community banks were to close, they would also affect the local towns. Farms, small shops, and Main Street businesses may not be able to withstand what he called not innovation but a direct assault on the financial health of rural America.

Kelley also noted the potential for platforms to collapse. He pointed to several high-profile crypto collapses in the last few years in which customers lost their investments. There is no such thing as “insurance” for victims of cybercrime on the crypto platforms. In contrast, FDIC insurance covers up to $250,000 in deposits if a bank goes under.

GENIUS Act establishes stablecoin regulations, but spurs debate

President Donald Trump signed the GENIUS Act on July 18, 2025. It provides the first national structure for stablecoins, which are digital tokens backed by assets such as U.S. dollars or Treasury bonds.

The statute would require full reserves, audits, and regular reporting by issuers. It also bars them from paying interest or providing yield-like products. Regulators have 18 months to develop rules before the GENIUS Act is enacted.

Its supporters say the Act injects clarity into a fast-expanding corner of the financial system. They say it reduces risks by prohibiting risky lending and assuring that there are reserves. But even with guardrails, critics caution, stablecoins could draw money away from banks and pose new threats.

It’s not just Alabama speaking out. Also in July, Europe’s largest asset manager, Amundi, warned that U.S. stablecoin policy could destabilize the global payment system. The group said stablecoins risk “quasi-bank” status that would circumvent regulatory scrutiny and undermine traditional lenders.

Kelley says this resonates with his own fears for rural Alabama. He likens it to a Ponzi scheme and says Congress must amend the law and close loopholes jeopardizing local banks.

He said that families, farmers, and small businesses are entitled to financial partners they can trust. He warned that unregulated crypto platforms should not lure rural communities onto their platforms in ways that undermine decades of progress across rural America.

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