Catenaa, Friday, August 29, 2025- Major US banks are lobbying to close what they call a loophole in newly passed stablecoin legislation, warning it could shift trillions in deposits away from traditional banks.
Industry groups including the American Bankers Association, Bank Policy Institute, and Consumer Bankers Association said the GENIUS Act, passed last month, allows cryptocurrency exchanges to indirectly pay interest or rewards to holders of third-party stablecoins such as Circle and Tether.
Under the law, banks may issue stablecoins but are barred from offering yield to customers.
The banking sector argues that permitting crypto exchanges to offer rewards creates an uneven playing field and could trigger deposit outflows, reducing credit availability, raising interest rates, and increasing costs for businesses and households. The US Treasury has estimated that stablecoins could divert $6.6 trillion in deposits from banks.
The move has drawn pushback from the crypto sector.
Coinbase’s chief legal officer Paul Grewal contended on social media that the legislation contains no loophole and criticized banks’ efforts to avoid competition.
Meanwhile, banks are expanding into stablecoin custody services, positioning themselves to control tokenized assets and reserves in what could become a parallel financial system.
Analysts say custody control could give banks influence over blockchain-based equities, bonds, and credit, avoiding a repeat of the FinTech era where startups dominated payments and trading flows.
Industry observers see this campaign as part of a broader strategy to shape the emerging digital asset infrastructure while preserving traditional banking advantages.
As tokenized assets gain traction, banks hope to secure early access to financial rails and maintain leverage over future payment and lending systems.
