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The passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act has triggered new waves of concern across the American banking sector. With stablecoins now formally regulated, banks fear a growing shift toward digital assets that could erode their relevance in the financial system.
Industry groups, including the American Bankers Association, are mobilizing lobbying efforts to amend parts of the legislation. Their main concern lies in a potential loophole: while stablecoin issuers themselves are prohibited from paying interest on deposits, third-party platforms remain free to do so. This could open the door for exchanges and fintech firms to attract depositors with higher yields—something traditional banks often struggle to match.
Already, firms such as Coinbase and PayPal are offering yield opportunities on stablecoin holdings through partnerships, raising red flags for critics who argue these activities bypass the spirit of the new law. Smaller regional banks appear most at risk, as customers may increasingly migrate toward stablecoin-backed services that promise stronger returns and faster transactions.
“Measures like these feel as if there’s an effort to replace us,” remarked Christopher Williston, president and CEO of the Independent Bankers Association of Texas, highlighting the pressure on community banks.
Source: create.vista.com
Even larger financial institutions are voicing alarm. The Bank Policy Institute, representing heavyweights like JPMorgan Chase and Bank of America, has urged Congress to address the issue, warning that unchecked growth of yield-bearing stablecoin products could undermine the traditional credit system and destabilize the broader U.S. economy.
The GENIUS Act may have been designed to regulate innovation, but for the banking industry, it represents a turning point. The coming months could determine whether traditional banks adapt to this new digital era—or find themselves increasingly sidelined.
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