US Banking Groups Push to Close Stablecoin Yield ‘Loophole’

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.