Catenaa, Thursday, August 14, 2025- Over 50 US banking groups are urging Congress to amend the recently enacted GENIUS Act, warning that current provisions could destabilize the financial system.
The American Bankers Association and others argue that the law’s restrictions on stablecoin interest payments are insufficient, allowing issuers to bypass regulations through affiliated platforms.
The GENIUS Act prohibits stablecoin issuers from directly offering interest to holders but does not extend this ban to exchanges or affiliated entities.
Banking groups contend that this gap enables platforms like Coinbase and PayPal to offer yield-bearing stablecoin products indirectly, potentially diverting deposits from traditional banks and disrupting credit creation.
In a letter to Senate Banking Committee leaders, the associations called for an expansion of the interest prohibition to include digital asset exchanges, brokers, and affiliated entities.
They warn that without these changes, the banking sector could face significant deposit outflows, undermining its role in economic stability.
Coinbase’s Chief Legal Officer, Paul Grewal, has defended the current law, stating that it adequately addresses the issue and that the banking sector’s concerns are unfounded.
He emphasized that the legislation was the result of extensive bipartisan support and should be allowed to proceed without further delay.
Earlier warnings about the GENIUS Act have come from a range of banking and financial voices. The Bank Policy Institute, Consumer Bankers Association and other groups cautioned that loopholes could trigger as much as $6.6 trillion in deposit outflows, weakening banks’ ability to extend credit.
Europe’s largest asset manager, Amundi, warned the law could accelerate dollarization abroad and undermine other nations’ monetary sovereignty. Academic critics told the Financial Times the measure erodes safeguards that separate banking from commerce, while Sen. Elizabeth Warren argued it could enable self-dealing by political figures, including Trump.
