A coalition of over one hundred and twenty-five cryptocurrency companies and advocacy groups has launched an organized offensive against U.S. bank lobbyists. This group includes major cryptocurrency companies such as Coinbase, Gemini, and Kraken.
This measure is intensifying the fierce battle over the authority to pay interest on stablecoin deposits.
Bank, Reason for the Revision of the GENIUS Act
The key issue is that the GENIUS Act clearly prohibits stablecoin issuers, like Tether, from paying dividends.
However, there are currently loopholes allowing third-party platforms like cryptocurrency exchanges to pass on these stablecoin earnings to users.
As a result, traditional banking groups are reportedly actively lobbying to block these pathways, claiming this constitutes regulatory arbitrage.
The banking lobby argued that if unregulated fintech platforms could offer high yields on cash-equivalent tokens, there could be systemic risks to the traditional financial structure.
They warned during a congressional briefing that maintaining the existing rules could lead to massive capital outflows. They projected that up to $6.6 trillion could exit from commercial banks to digital asset platforms.
Such changes would weaken the capital base of banks, reducing their ability to issue mortgages and corporate loans. Consequently, lending institutions would reduce the scale of funding, leading to increased borrowing costs for American households.
Cryptocurrency coalition strikes back
On December 18th of last year, the cryptocurrency coalition urged lawmakers in a letter sent to the U.S. Senate Banking Committee to reject attempts to expand the scope of the recently enacted GENIUS Act.
"If the issue is reopened before the GENIUS Act is even implemented, it would undermine the certainty of the regulatory framework established by Congress and introduce unnecessary risks to broader market structure efforts. This suggests that even recent compromises could be immediately renegotiated, potentially undermining the predictability that markets, consumers, and innovators rely on," the group argued.
The cryptocurrency coalition dismissed concerns about banking stability as a protectionist act aimed at maintaining monopolies over low-interest deposits.
Participants argued that banks want to protect their margins by preventing consumers from accessing the 4% yields currently offered in the government bond market.
"The stablecoin reward program allows platforms to directly share value with users and helps households benefit from a high-interest rate environment instead of bearing losses due to inflation," cryptocurrency companies emphasized.
Gemini co-founder Tyler Winklevoss also publicly criticized the actions of the banking lobby, describing it as an attempt to "re-discuss a legislative issue that has already been resolved."