Bankers Want Stablecoin Law Changed—Crypto Lobby Says No Way

Crypto lobbyists sent a letter to the Senate Banking Committee Tuesday evening, urging lawmakers to reject efforts by the banking industry to undo key elements of the recently passed GENIUS Act. 

Last week, the American Bankers Association, and a coalition of over 50 bankers’ associations, representing every state in the nation, lobbied the Senate Banking Committee to revise several sections of the bill,which was signed into law by President Donald Trump last month and established a federal framework for issuing and trading stablecoins. 

The bankers implored senators to use an upcoming digital asset market structure bill to prohibit crypto exchanges like Coinbase from offering yield to customers on stablecoin deposits. The GENIUS Act allows the feature, although the legislation prohibits stablecoin issuers themselves from offering it. 

The bankers also pushed for the Senate’s market structure bill to repeal an entire section of the GENIUS Act allowing uninsured state-chartered stablecoin issuers to operate nationwide—a permission they said violates states’ authority. 

Now, two top crypto lobbying firms—the Blockchain Association and the Crypto Council for Innovation—are pushing back hard against said demands, and pushing the Senate Banking Committee to disregard the banking lobby’s demands. 

“[The bankers’ requests] unfortunately seek to create an uncompetitive payment stablecoin environment, protecting banks at the expense of broader industry growth, competition, and consumer choice, which form the bedrock of America’s vibrant financial and innovation landscape,” the crypto groups wrote last evening.

The letter attempted to counter recent claims from the banking lobby that interest-bearing stablecoins could drain as much as $6.6 trillion from insured bank accounts to the uninsured crypto sector in coming years, arguing such conclusions, based on a recent Treasury Department report, are “economically unrealistic and unsupported by observed data.”

The crypto groups added that without the GENIUS Act provision allowing state-chartered stablecoin issuers to operate nationwide, “states could effectively veto the stablecoin redemption rights of out-of-state holders.” 

They also fiercely defended the rights of crypto exchanges to pay customers interest on uninsured stablecoins, arguing that outlawing that practice, while allowing insured bank deposits to accrue interest, would amount to “tilt[ing] the playing field in favor of legacy institutions.”

It remains unclear whether the bankers’ pleas will be heeded, months after the language of the GENIUS Act was negotiated and voted through in both chambers of Congress. 

Earlier this month, when asked whether the GENIUS Act should have prevented third parties like Coinbase and PayPal from offering customers interest on stablecoin deposits, a Senate staffer involved in the legislation told Decrypt it would not have been appropriate for the bill, which they said was designed to regulate stablecoin issuers, to consider how stablecoins should be regulated on secondary markets.