Bankers warn yield-bearing stablecoins threaten deposits and local lending
A coalition of US community banks is calling on lawmakers to amend the GENIUS Act, arguing that a regulatory gap allows yield-generating stablecoins to compete unfairly with traditional bank deposits. The push highlights growing tension between banks and crypto platforms as stablecoin adoption accelerates.
In a letter sent to the US Senate, the Community Bankers Council, representing more than 200 community bank leaders, urged legislators to tighten stablecoin rules. While the GENIUS Act explicitly prohibits stablecoin issuers from paying interest, the group argues that some firms are bypassing this restriction by offering rewards through crypto exchanges and affiliated partners.
According to the council, this practice allows stablecoins to function similarly to savings products without being subject to banking regulations or deposit insurance.
Community bankers warned that if deposits migrate from banks to stablecoin platforms, it could reduce lending capacity for small businesses, farmers, students, and homebuyers. The group said exchanges and stablecoin-linked firms are not structured to replace community banks’ role in local credit markets.
The council has asked Congress to include a clear ban on affiliates and partners offering yield on stablecoins in upcoming crypto market structure legislation. Other banking groups have echoed similar concerns, while crypto industry organizations argue that tighter rules could limit innovation and consumer choice.
The debate underscores the broader policy struggle over how stablecoins should fit into the US financial system.
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