Advocacy bodies warn against Wall Street’s influence on stablecoin regulation
Tensions are escalating in Washington as crypto industry groups clash with Wall Street bankers over the future of stablecoin regulation under the newly enacted GENIUS Act. The dispute centers on proposed changes that critics say would unfairly advantage banks while stifling innovation in the digital asset sector.
Several U.S. banking associations, led by the Bank Policy Institute (BPI), have urged Congress to tighten the GENIUS Act by addressing what they describe as a “yield loophole.” While the law prohibits stablecoin issuers from directly offering yields, it does not explicitly ban exchanges or affiliates from doing so on their behalf.
Banking groups warn this gap could allow stablecoins to attract users with interest-like returns, potentially diverting as much as $6.6 trillion from traditional bank deposits. They argue that unchecked growth in yield-bearing stablecoins could disrupt credit flows to households and small businesses.
Crypto Industry Pushes Back
In a joint letter to the Senate Banking Committee, the Crypto Council for Innovation (CCI) and the Blockchain Association rejected these claims, accusing bankers of trying to re-litigate issues that had already been resolved during months of negotiation.
“Payment stablecoins are not bank deposits, or money market funds, or investment products, and thus they are not regulated in the same way,” the groups wrote. “Unlike bank deposits, payment stablecoins are not used to fund loans.”
The advocacy bodies also defended Section 16(d) of the law, which allows subsidiaries of state-chartered institutions to operate across state lines without additional licenses. Banking associations want this clause repealed, but crypto groups argue its removal would reintroduce a “fragmented, balkanized regulatory regime” that undermines interstate commerce.
Expert Analysis and Market Data
A July 2025 analysis by Charles River Associates found no evidence linking stablecoin growth to significant bank deposit outflows, contradicting the banking sector’s warnings.
At the same time, yield-bearing stablecoins continue to expand. According to StableWatch, more than $800 million in payouts have been distributed to holders to date. In the past month alone, Ethena Staked USDe (sUSDe) led with $30.71 million, followed by Securitize’s BUIDL at $8.39 million and Sky Ecosystem’s staked USDe at $6.78 million.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.