The American Bankers Association and other financial groups are warning about new legislation regarding stablecoins. They believe the law creates dangerous gaps that could threaten financial stability.
Gaps in the Stablecoin Law
The Bankers Association and 52 trade groups argue that the law prevents stablecoin issuers from paying interest to holders but does not stop related entities—such as exchanges, brokers, or dealers—from offering similar incentives. They believe this loophole could lead to deposit flight from the traditional banking system into stablecoins, shrinking the capital banks use to make loans.
Market Share Conflict
The possibility of yield-bearing stablecoins emerging poses a risk of rising lending costs and reduced loan availability, which could negatively impact households and businesses. The Bank Policy Institute and Financial Services Forum also express concerns about the risk of deposit flight during periods of stress, which could tighten credit conditions across the economy.
Coinbase's Response to Bank Warnings
Coinbase Chief Legal Officer Paul Grewal dismissed these warnings, calling them an attempt to block competition. He noted that lawmakers from both parties had already rejected 'unrestrained efforts to avoid competition' and that the industry should 'move on.' For now, the GENIUS Act remains in effect as written.
The conflict of interests between traditional banks and digital assets underscores a broader struggle to modernize payment systems without destabilizing the credit framework that supports the U.S. economy.
