The intensity of the disagreement in Washington between traditional banks and digital asset companies is escalating over the regulation of stablecoin yields, as banking institutions seek to introduce new amendments to the GENIUS law aimed at limiting the ability of cryptocurrency companies to offer high-yield products to their users.
Banks have warned that allowing interest to be paid on stablecoins could lead to a mass exodus of deposits estimated at around $6.6 trillion, which could raise borrowing costs and reduce the volume of lending directed to households and businesses, negatively impacting the U.S. economy. Although the amendments to the law issued last July prohibited banks themselves from offering direct interest to stablecoin holders, they did not prevent exchanges and cryptocurrency companies from launching yield-bearing products using currencies like USDT and USDC.
For their part, banks believe that these loopholes have created an unfair competitive environment, allowing digital platforms to attract customers with high-yield products, while banks remain constrained by low-interest rates. Therefore, banking bodies have called for the removal of powers granted to certain uninsured institutions at the state level and pushed for a comprehensive ban on any interest offered to stablecoin investors.
In contrast, the cryptocurrency sector vehemently rejects these pressures. The Blockchain Association confirmed that the law in its current form is the result of a rare bipartisan compromise in Congress, while Paul Grewal, Chief Legal Officer at Coinbase, described the banks' claims about 'loopholes' as merely an attempt to obstruct competition. The Digital Currency Innovation Committee accused banking institutions of seeking to impose a monopolistic environment that hinders development in the stablecoin market.
The debates have not been without sharp criticisms, as expert Austin Campbell argued that banks are practicing a policy of 'profit for the sector and loss for the community' by offering nearly zero interest to depositors in exchange for high-risk loans. Meanwhile, Matt Hogan, Chief Investment Officer at Bitwise, sarcastically commented on banks' demands to prevent customers from earning yields via stablecoins while continuing to offer low-interest rates.
This conflict, described by some as the 'Lobby Wars in Washington', goes beyond just the issue of stablecoin yields, revealing a strategic clash between the traditional banking system and the cryptocurrency industry over the future of payments and savings. The outcome could reshape the financial competition in the United States and determine whether users will find a real alternative to traditional banks in managing their savings.
