American banking associations have reached out to the Senate Banking Committee requesting amendments to a bill focused on stablecoin regulations.
Banks' Concerns Over New Legislation
The American Bankers Association (ABA) and 52 other banking organizations expressed concerns regarding the law signed by President Donald Trump, which includes stablecoin regulations. In a letter, they highlighted issues related to interest payment, state regulations, and stablecoin issuance by non-financial companies.
Gaps in Existing Regulations
The banks noted that while they supported the prohibition on interest payments by stablecoin issuers, the current text allows for this prohibition to be easily circumvented. The letter stated that exchanges, brokers, and affiliates could offer interest-like returns, transforming stablecoins from mere payment instruments into stores of value and credit mechanisms.
Potential Consequences for the Financial System
Banking institutions also warned that such regulatory gaps could increase the risk of deposit outflows, especially during crisis periods. This could lead to a decrease in credit supply, an increase in interest rates, and higher borrowing costs for businesses and households.
The concerns raised by banking associations emphasize the importance of careful regulation of stablecoins to maintain financial stability in a changing market.
