125 Crypto Teams Inform Congress Stablecoin Yield Ban Favors Large Banks

A coalition of 125 crypto and fintech organizations delivered a forceful rejection of banking business efforts to broaden the GENIUS Act’s prohibition on stablecoin yields, warning that broader restrictions would remove client alternative whereas defending conventional banks from competitors.

The Blockchain Affiliation led the coalition in a letter to Senate Banking Committee Chairman Tim Scott and Rating Member Elizabeth Warren on Wednesday, arguing that makes an attempt to reinterpret the legislation’s yield ban signify protectionism slightly than client safety.

“The push to limit stablecoin rewards past that agreed to in GENIUS will not be a technical refinement or a client safety repair,” the letter acknowledged.

“It will prohibit the identical sorts of incentive packages for stablecoin funds that banks have lengthy provided on bank cards and different sorts of fee providers.“

Banks Push Uneven Restrictions on Digital Funds

The dispute facilities on whether or not platforms like Coinbase and PayPal can supply rewards to stablecoin customers by way of loyalty packages and third-party incentives.

Whereas the GENIUS Act explicitly prohibits stablecoin issuers from paying curiosity on to holders, the coalition maintains that Congress intentionally preserved intermediaries’ means to supply lawful rewards on the utility layer.

Banking teams led by the American Bankers Affiliation have urged Treasury to interpret “curiosity or yield” broadly sufficient to seize any financial profit, together with service provider reductions and platform rewards.

The coalition known as this growth “overtly protectionist,” noting that banks face no related restrictions on bank card rewards regardless of partaking in riskier balance-sheet actions than GENIUS-regulated stablecoin issuers.

“With the federal funds fee at roughly 3.50–3.75%, common checking account yields stay close to 0.07% and financial savings accounts round 0.40%,” the letter famous.

“Stablecoin rewards packages allow platforms to share worth straight with customers, serving to households profit from higher-rate environments slightly than absorbing losses to inflation.“

Coalition Disputes Financial institution Deposit Flight Claims

Banking associations have warned that stablecoin yields may set off deposit outflows resembling the Eighties cash market fund disaster, when withdrawals drained $32 billion from banks between 1981 and 1982.

Treasury estimates prompt yield-bearing stablecoins may lead to as much as $6.6 trillion in deposit flight.

The coalition firmly rejected these projections, citing Charles River Associates’ evaluation, which discovered no proof of disproportionate deposit outflows from neighborhood banks between 2019 and 2025.

The letter questioned how banks can declare deposit constraints whereas holding roughly $2.9 trillion in reserve balances, incomes curiosity on the Federal Reserve slightly than deploying them into loans.

“Opposition to stablecoin rewards displays safety of incumbent income fashions, not safety-and-soundness issues,” the coalition wrote, arguing that limiting third-party incentives would forestall stablecoins from competing on a stage taking part in discipline with legacy fee techniques.

Regulatory Certainty and Market Competitors at Stake

Past client alternative, the coalition warned that reopening the yield situation earlier than GENIUS implementation begins would undermine the regulatory certainty that defines Congressional frameworks.

“It will sign that even lately enacted compromises stay topic to virtually instant renegotiation, undermining the predictability that markets, shoppers, and innovators depend on,” the letter acknowledged.

The teams emphasised that rewards and incentives are commonplace aggressive instruments in markets with excessive community results and switching prices, together with the present funds market.

Stablecoins supply quicker settlement, decrease transaction prices, and larger transparency in comparison with conventional rails, however adoption requires incentives to beat entrenched consumer habits.

The signatories embrace business leaders similar to Coinbase, PayPal, Stripe, Ripple, and Kraken, in addition to Stand With Crypto chapters throughout 20 states and funding companies similar to Andreessen Horowitz and Paradigm.

“Preserving the stability Congress struck is important to defending shoppers, fostering competitors, and guaranteeing that market construction laws can advance on a bipartisan and sturdy foundation,” the coalition concluded, urging lawmakers to reject any effort to broaden the yield prohibition past issuer funds.

The dispute comes as stablecoin adoption accelerates, with a circulation of $310 billion.

The market may triple to $1 trillion by 2026 as establishments combine blockchain funds into monetary infrastructure.

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