Stablecoin Loophole: Urgent Warning from Bank Policy Institute on GENIUS Act Fix

Key Points

1. The GENIUS Act's current wording may permit stablecoin issuers to pay interest through various channels, posing a structural risk to financial stability.

2. BPI represents major U.S. banks and argues this loophole could divert up to $6.6 trillion from traditional bank deposits, harming economic funding.

3. The GENIUS Act aims to regulate non-traditional investments but may fail to address systemic risks if not revised to close this loophole.

4. Banking groups assert payment stablecoins should not pay interest, as they are meant for transactions, not competing with regulated deposits or money market funds.

5. BPI urges lawmakers to revise the GENIUS Act to protect financial stability and ensure equitable economic growth.