A group of large banking organizations in the United States warns that the loopholes in the GENIUS Act could allow stablecoin issuers to pay interest through affiliated platforms, posing serious risks to the financial system.
They are concerned that the $6.6 trillion deposit flow could withdraw from banks, limiting credit, increasing interest rates, and affecting the borrowing ability of households and businesses in the United States.
MAIN CONTENT
Loopholes in the GENIUS Act could allow stablecoins to pay interest through third parties, posing risks to the traditional banking system.
$6.6 trillion in deposits could be withdrawn from banks, increasing borrowing costs and limiting credit.
Stablecoins currently have a value of $280.2 billion with the potential to rise to $2 trillion by 2028, requiring clearer regulations.
How much bank deposits could be affected by the loopholes in the GENIUS Act?
Major U.S. banking associations predict a potential withdrawal of $6.6 trillion in deposits from banks due to legal loopholes allowing stablecoins to pay interest through affiliated platforms.
A coalition of organizations such as the American Bankers Association jointly signed a letter to Congress stating that this event would tighten credit, push interest rates higher, and make consumer and business lending more difficult. This risk is similarly emphasized in a report by the U.S. Department of the Treasury in April 2025.
Why are banks concerned about the potential development of interest-bearing stablecoins?
Banks raise deposits for personal and business loans; when money transfers to interest-bearing stablecoins, this capital shrinks, increasing borrowing costs and making credit scarce.
Currently, some stablecoins allow users to receive rewards for holding them through platforms like Coinbase or Kraken, even though the stablecoin issuer does not pay interest directly. This raises concerns among banks that stablecoins might become unfair competitors to bank deposits.
How do stablecoins differ from bank deposits?
Stablecoins maintain a fixed exchange rate but do not contribute to credit creation or economic development investment like bank deposits.
According to the Bank Policy Institute, stablecoins currently have a market value of $280.2 billion, with Tether and USDC accounting for over 80%. The Treasury Department predicts this figure could reach $2 trillion by 2028, increasing the urgency for regulatory completion.
"Rewards through stablecoins are not interest, but rewards, so the regulation prohibiting interest payment should not apply to these programs."
Brian Armstrong, CEO of Coinbase, 2025
However, cryptocurrency companies like PayPal also express intentions to maintain stablecoin incentive programs despite the GENIUS Act. The differing viewpoints create significant challenges in harmonizing legislation and innovating financial technology.
What risks do the loopholes in the GENIUS Act pose to the financial system?
The GENIUS Act was enacted in July 2025, prohibiting stablecoin issuers from directly paying interest. However, the law does not prohibit affiliated companies from doing so.
Banks warn that this is an opportunity for stablecoins to pay interest through indirect channels, which could attract deposit flows away from the traditional banking system. This weakens the banks' capital base and creates risks for the credit market during economic stress.
What impact does the GENIUS Act have on the USD's position in global finance?
Cryptocurrency analysts believe the GENIUS Act helps bolster the status of the U.S. dollar by promoting USD-backed stablecoins, enhancing the role of this currency as a global reserve.
However, the conflict between promoting innovation and maintaining financial stability is becoming increasingly tense, requiring the U.S. Congress to intervene quickly to adjust accordingly.
Frequently Asked Questions
What is the GENIUS Act and its objectives?
The GENIUS Act is legislation aimed at regulating stablecoins, prohibiting issuers from paying interest directly to ensure financial stability and avoid unfair competition with banks.
Why are banks concerned about stablecoins paying interest through affiliates?
This possibility creates unfair competition, causing deposit flows from banks to decline sharply, leading to tighter credit and rising interest rates.
How could stablecoins affect the credit market?
If bank deposits decrease due to transfers to interest-bearing stablecoins, credit for households and businesses may be cut, raising borrowing costs.
What is the current scale of the stablecoin market?
The stablecoin market is currently about $280.2 billion and is projected to increase to $2 trillion by 2028, according to the U.S. Department of the Treasury.
How are cryptocurrency companies reacting to the GENIUS Act?
Many companies argue that stablecoin rewards are not interest, so the regulation prohibiting interest payments should not apply to these programs.
Source: https://tintucbitcoin.com/stablecoin-doi-mat-rui-ro-phap-ly-genius/
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