A coalition consisting of over 125 crypto companies and interest organizations has launched a coordinated attack against American bank lobbyists. The group includes major crypto players like Coinbase, Gemini, and Kraken.
This escalates a very important battle over who has the right to pay interest on deposits in stablecoins.
Why banks are lobbying to change the GENIUS Act
The main problem is that the GENIUS Act explicitly prohibits stablecoin issuers like Tether from paying dividends.
However, there is a loophole that allows third-party platforms, such as crypto exchanges, to pass this stablecoin yield on to users.
As a result, traditional banking groups are aggressively working to close this opportunity, believing it constitutes regulatory arbitrage.
The banking lobby claims that if unregulated fintech platforms are allowed to offer high returns on cash-equivalent tokens, it poses a systemic risk to the traditional financial architecture.
In meetings with Capitol Hill, they warned that current rules could lead to massive capital flight. They estimate potential deposit outflows of up to $ 6,6 trillion from commercial banks to digital asset platforms.
Such a change, they argue, would deplete the capital base that banks use to issue mortgages and corporate loans. This weakening would force lenders to reduce capacity and increase borrowing costs for American households.
Crypto coalition strikes back
In a letter to the U.S. Senate Committee on Banking on December 18, the crypto coalition urged lawmakers to reject attempts to expand the scope of the recently introduced GENIUS Act.
“Reopening this matter before the GENIUS Act is implemented will undermine the predictability that characterizes regulations passed by Congress and introduce unnecessary risk into a broader market structure. It would signal that even recently made compromises can still be renegotiated immediately, which undermines the predictability that markets, consumers, and innovators depend on,” argued the group.
The crypto coalition also dismissed banks' concerns about stability as a protectionist attempt to maintain a monopoly on low-interest deposits.
The signatories believed that banks are only trying to protect their profit margins by preventing consumers from accessing the 4% return currently available in the government bond market.
“Stablecoin reward programs enable platforms to share value directly with users, helping households benefit from higher interest rates instead of losing out to inflation,” argued the crypto companies.
Tyler Winklevoss, co-founder of Gemini, also openly criticized the banking lobby's maneuver, calling it an attempt to “revisit a law that has already been decided.”
