American banking groups call on Senate to amend new stablecoin law

Major banking groups in the U.S., including the American Bankers Association (#ABA ) and the Institute of Banking Policy, are urging Congress to close the "loopholes" in the GENIUS Act on stablecoins. They warn that these loopholes could lead to a large-scale bank run, endangering the traditional banking system.

Risks from paying interest on stablecoins

According to banking groups, although the GENIUS Act prohibits stablecoin issuers from directly paying interest, exchanges and third parties can still offer rewards to holders #stablecoin . This could encourage people to transfer funds from bank accounts to interest-bearing stablecoins, resulting in a deposit outflow of up to $6.6 trillion from banks.

The consequence is that borrowing costs will rise and the ability to provide loans to businesses and households will be diminished.

Banking groups propose that Congress extend the interest payment ban to include exchanges and other entities. They also call for the removal of provisions allowing non-financial companies to issue stablecoins and the repeal of the allowance for state-licensed issuers to operate nationwide without additional oversight.

Although some experts argue that this risk is "relatively low," banking groups still want to ensure a robust legal framework to maintain the stability of the traditional financial system in the context of major cryptocurrency companies like Paxos and Circle actively seeking national banking licenses. #anh_ba_cong