A coalition of more than 125 crypto companies and advocacy groups has launched a coordinated offensive against American bank lobbyists. The group includes major crypto companies like Coinbase, Gemini, and Kraken.
With this step, the battle escalates over who has the right to pay interest on stablecoin deposits.
Why banks are lobbying to amend the GENIUS Act
The main turning point is that the GENIUS Act explicitly prohibits stablecoin issuers like Tether from paying dividends.
Currently, there is a gap in the law that allows third parties, such as crypto exchanges, to pass on this stablecoin interest to users.
Therefore, traditional banks are lobbying hard to close this option, arguing that it amounts to regulatory arbitrage.
The banking lobby argues that if unregulated fintech platforms are allowed to offer high yields on cash-like tokens, this poses a systemic risk to the traditional financial structure.
In talks with Capitol Hill, they warned that maintaining the current rules could lead to significant capital flight. They estimate that as much as $6.6 trillion in deposits could flow from commercial banks to digital asset platforms.
According to them, such a shift would erode the capital base of banks, which is necessary for providing mortgages and business loans. This erosion would result in banks being able to lend less and the borrowing costs for American families rising.
Crypto coalition strikes back
In a letter dated December 18 to the U.S. Senate Banking Committee, the crypto coalition urged lawmakers to reject attempts to expand the recently enacted GENIUS Act.
"Reopening this issue before the GENIUS Act is implemented would undermine the certainty that comes with Congressional legislation and unnecessarily add risk to the broader market structure. It would signal that even recent compromises could be up for debate again, undermining the predictability that markets, consumers, and innovators rely on," the group stated.
The crypto coalition also dismissed the banks' concerns about stability as an attempt to maintain their monopoly on low-interest deposits.
The signatories say that banks primarily want to protect their profit margins by preventing consumers from accessing the 4% yields that are currently available in the Treasury market.
"Stablecoin reward programs enable platforms to share value directly with users, allowing families to benefit from higher interest rates instead of losing purchasing power due to inflation," argue the crypto companies.
Tyler Winklevoss, co-founder of Gemini, also publicly criticized the actions of the banking lobby, which he claims are intended to "revisit a settled legislative issue."
