Banks warn GENIUS Act stablecoin yield loophole could drain $6.6T from U.S. deposits

Banking groups led by the Bank Policy Institute (BPI) told Congress the GENIUS Act of 2025 contains a loophole that lets crypto platforms and affiliates offer yield on stablecoins despite the law barring issuers from paying interest. In a January 6 letter the coalition said exchanges can route rewards and yield through affiliated firms or programs, creating ‘shadow-bank’ competition that could prompt a mass migration of deposits from U.S. banks — industry estimates put potential outflows as high as $6.6 trillion. Regulators and commentators argue the law targets stablecoin issuers narrowly and does not level the playing field across payment systems; some propose broader reforms similar to a "Clarity Act" to cover both traditional and digital payments. Market context: total stablecoin market cap cited near $318 billion (USDT ~ $187B, USDC ~ $75B with ~73% annual growth). The groups warn that closing the yield loophole would likely restore stablecoins to payment-only roles and could send existing stablecoin balances back to banks, with uncertain effects on credit availability. The dispute frames a policy choice between maintaining banking stability and allowing crypto platforms to compete as high-yield alternatives — an outcome that could influence liquidity flows, funding costs and lending capacity in both the banking and crypto sectors.