Several US banking associations led by the Bank Policy Institute have sent a call to Congress urging for tougher stablecoin regulations.
Request for Tougher Laws
The associations warned that a gap in the GENIUS Act could allow issuers to evade the prohibition on paying interest by partnering with crypto exchanges or affiliated companies. The law prohibits stablecoin issuers from directly paying interest, but does not extend that ban to third parties.
Potential Threat to the Credit System
Banking groups warn that large-scale adoption of yield-paying stablecoins could weaken the credit system by increasing deposit flight risk, particularly during market stress. This could lead to higher interest rates and reduced credit availability for small businesses and consumers.
Stablecoin Market: Current State and Predictions
Although the stablecoin market is currently much smaller than the US money supply, analysts expect rapid growth. Currently, its combined market cap is $280.2 billion. It's projected that the stablecoin market could grow to $2 trillion by 2028, highlighting the urgency for lawmakers to address potential loopholes.
The call from banking associations underscores the need for preventive measures to protect the nation’s credit system from potential negative consequences of stablecoin growth.
