The American Bankers Association (ABA) and 52 state banking organizations sent a letter to the leaders of the Senate Banking Committee, calling for amendments to certain provisions of the Act #GENIUS . They argue that this law is creating a "dangerous loophole" for the financial system, particularly concerning interest payments for stablecoins.
Three main proposals from the banks
Tightening the ban on interest/yield payments for stablecoins: The ABA agrees with prohibiting stablecoin issuers from paying interest, but warns that exchanges or brokerage firms may circumvent the law to pay yields. This could cause deposit flows to shift away from banks, weakening the banking system's ability to create credit. #ABA proposes extending the ban to these intermediaries.
Restoration of state oversight: Banks oppose the GENIUS Act allowing specialized depository institutions (SPDI) to operate federally without state licenses. They argue this undermines the "dual banking system" and demand the repeal of this regulation so that states can oversee financial institutions operating in their jurisdictions.
Complete ban on non-financial companies issuing stablecoins: Banks are concerned that allowing non-financial companies to issue stablecoins could siphon deposits away from banks, reducing their ability to provide credit to the economy. They propose a complete ban to maintain the separation between banking and commerce.
Response from the cryptocurrency community
Paul Grewal, legal director at Coinbase, rebutted these proposals, arguing that there is no "loophole" in the law. He emphasized that both the House and the Senate rejected the banks' efforts to evade competition.