US Banking Groups Push to Close Stablecoin Yield ‘Loophole’
Main Idea
US banking groups are urging Congress to close a loophole in the GENIUS Act that allows stablecoin issuers to pay interest to holders through affiliates, warning it could lead to significant bank deposit outflows.
Key Points
1. The Bank Policy Institute (BPI) and other banking associations argue that the GENIUS Act's current wording permits stablecoin issuers to bypass restrictions on yield payments via affiliates.
2. They warn that yield-bearing stablecoins could trigger $6.6 trillion in bank deposit outflows, posing risks to the traditional banking system.
3. The GENIUS Act, signed into law in July, prohibits stablecoin issuers from paying yields but does not explicitly ban affiliated entities from doing so.
4. Stablecoin market leaders Tether (USDT) and USDC dominate over 80% of the $280.2 billion market, with projections suggesting the sector could grow to $2 trillion by 2028.
5. Companies like Coinbase and PayPal are advancing stablecoin yield programs, claiming the GENIUS Act does not apply to them as they are not the issuers.
Description
Several major US banking associations are urging Congress to tighten new stablecoin regulations, warning that a gap in the GENIUS Act could allow issuers to skirt restrictions on paying interest to holders. Key Takeaways: TUS banking groups want Congress to close a GENIUS Act loophole allowing stablecoin yield via affiliates. They warn yield-bearing stablecoins could trigger $6.6T in bank deposit outflows. Such outflows could raise interest rates, cut loan availability, and increase borrowing co...
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