GENIUS Act Loophole Could Shift $6.6T to Yield Stablecoins
US banking groups led by the Bank Policy Institute (BPI) and backed by the American Bankers Association are urging Congress to close a loophole in the GENIUS Act that allows crypto exchanges and affiliated issuers to offer interest-bearing stablecoins. They warn that retaining this gap could trigger up to $6.6 trillion in outflows from traditional bank deposits into yield-bearing stablecoins, undermining banks’ core lending capacity and overall financial stability. Stablecoins now account for $280 billion of the $22 trillion US money supply, with USDT and USDC holding over 80% market share. Unlike bank deposits or money market funds, stablecoin issuers do not fund yields through loans or securities, heightening liquidity risks during economic stress. The US Treasury projects the stablecoin sector could grow to $2 trillion by 2028, amplifying systemic vulnerabilities unless regulatory gaps are closed.
Bearish
This news highlights a potential regulatory crackdown closing the stablecoin yield loophole in the GENIUS Act, increasing uncertainty around interest-bearing stablecoins. If the gap is closed, demand for yield-paying stablecoin products may drop sharply, leading to reduced issuance and adoption. In the short term, trading volumes and market sentiment for these stablecoins could weaken; over the long term, tighter regulation may curb sector growth projections, both exerting downward pressure on stablecoin valuations.