Banks Push Tougher GENIUS Act, Close Stablecoin Yield Gaps

Major US banking associations have urged Congress to tighten stablecoin regulation under the GENIUS Act. In a letter to the Senate Banking Committee, they called for amendments to close loopholes that allow digital asset exchanges and affiliates to offer yield products on payment stablecoins. Under current rules, stablecoin issuers cannot pay interest, but intermediaries may sidestep the ban. Banks warn this could divert deposits from traditional credit intermediation into higher-yielding stablecoins, undermining financial stability and credit supply. To address this, they propose extending the interest ban to exchanges and brokers, eliminating non-financial issuer exemptions, and strengthening state oversight. They also seek repeal of provisions that allow out-of-state chartered institutions to operate without host-state approval. These reforms aim to ensure stablecoin regulation preserves banks’ role in credit creation and maintains stablecoins as payment instruments, safeguarding market stability.