US Banks Push to Close Stablecoin Yield Loophole in GENIUS Act

Tensions between traditional banks and the cryptocurrency sector are rising. Several major US banking groups, including the Bank Policy Institute (BPI), have called on Congress to amend the recently passed GENIUS Act to close a loophole that could allow stablecoin issuers to indirectly pay interest or other yields.

Concerns Over Trillions Leaving Banks In a letter to Congress on Tuesday, BPI warned that if this “loophole” remains unaddressed, it could trigger a massive outflow from traditional bank deposits — estimated at up to $6.6 trillion. Such a shift, banks argue, could jeopardize the availability of credit for US households and businesses. The GENIUS Act explicitly prohibits stablecoin issuers from offering interest to token holders, but does not directly cover cryptocurrency exchanges or affiliated entities. According to BPI, this omission could allow issuers to bypass the ban by offering yields through such partners.

Stablecoins vs. Traditional Deposits BPI, together with other banking associations, emphasized that stablecoins differ fundamentally from bank deposits and money market funds. Unlike these, stablecoins do not finance loans or invest in securities to generate returns. “Payment stablecoins should not be paying interest in the same way that regulated banks or money market funds do,” the letter states. Banks fear that the widespread adoption of yield-bearing stablecoins could destabilize the credit system, particularly in times of financial stress, leading to more expensive loans and reduced access to credit.

Stablecoin Market Growing Rapidly While the current market capitalization of stablecoins is about $280.2 billion — only a fraction of the total $22 trillion US money supply — the growth rate is rapid. Over 80% of the market is dominated by Tether (USDT) at $165 billion and USDC at $66.4 billion. According to US Treasury estimates, the stablecoin market could grow to $2 trillion by 2028.

Political Dimension President Donald Trump signed the GENIUS Act on July 18, which, according to many analysts, is set to strengthen the role of the US dollar globally. The legislation aims to promote the use of dollar-pegged stablecoins, compete with other currencies, and reinforce the dollar’s position as the world’s leading reserve currency.

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