A coalition of US banking groups, led by the Bank Policy Institute (BPI), has urged lawmakers to address a major oversight in the recently passed GENIUS Act stablecoin bill.
In an Aug. 12 statement, the BPI conceded that the bill blocks stablecoin issuers from offering direct yields or interest to holders.
However, they pointed out that the language in the stablecoin bill leaves a critical gap that does not cover crypto exchanges or affiliated firms, which could partner with issuers to deliver indirect yields.
According to the banks, this could trigger a massive shift of deposits from the banking sector to digital assets. The group estimates potential outflows of up to $6.6 trillion.
Such a move, they say, could shrink lending capacity, push interest rates higher, and increase borrowing costs for US businesses and households.
They added:
“Congress must protect the flow of credit to American businesses and families and the stability of the most important financial market by closing the stablecoin payment of interest loophole.”
Crypto stakeholders react
Industry figures quickly pushed back against the banks’ warning, calling it an attempt to stifle competition.
Coinbase Chief Legal Officer Paul Grewal described the concerns as overstated, noting that the US Congress has already considered and rejected similar proposals.
He said:
“This was no loophole and you know it. 376 Democrats and Republicans in the House and Senate rejected your unrestrained effort to avoid competition. So did one President.”
Coinbase CEO Brian Armstrong echoed similar views, while suggesting that the banks are motivated more by profit protection than systemic risk.
Similarly, Jake Chervinsky, CLO at Variant Fund, pointed out that the banks’ regulatory influence fell short, and the resulting concern is largely self-serving.
Meanwhile, Mikko Ohtama, co-founder of Trading Protocol, noted that banks are resisting stablecoins because they threaten the traditional deposit models.
According to him:
“The banks need to give more competitive offers for savings accounts and such. This kind of competition would be better for the customers of the banks. It’s a simple process: people won’t move money out of banks if the banks give them a good deal.”
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