A coalition of over 125 crypto companies and advocacy groups has launched a coordinated attack against US bank lobbyists. This group includes major cryptocurrency companies such as Coinbase, Gemini, and Kraken.
The move intensifies a high-stakes battle over who has the right to pay interest on stablecoin deposits.
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Why are banks lobbying to amend the GENIUS Act?
The main point of contention is that the GENIUS Act explicitly prohibits stablecoin issuers like Tether from paying dividends.
However, there is currently a loophole that allows third-party platforms such as cryptocurrency exchanges to pass on the proceeds of this stablecoin to their users.
As a result, traditional banking groups are actively lobbying to shut down this vehicle, arguing that it amounts to regulatory arbitrage.
Banking lobbies argue that allowing unregulated fintech platforms to offer high yields on cash-equivalent tokens poses systemic risks to traditional financial architecture.
Speaking at a Capitol Hill briefing, he warned that keeping the current rules in place could lead to massive capital flight. They estimated potential deposit outflows of up to $6.6 trillion from commercial banks to digital asset platforms.
These changes, they argue, will hollow out the capital base banks use to underwrite mortgages and business loans. This erosion will force financial institutions to reduce supply capacity and raise borrowing costs for U.S. households.
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Cryptocurrency Union strikes back
In a letter to the U.S. Senate Banking Committee on December 18, the Cryptocurrency Coalition called on lawmakers to reject attempts to expand the scope of the recently enacted GENIUS Act.
“Reopening this issue before the GENIUS Act takes effect would weaken the certainty that defines the regulatory framework Congress has enacted and introduce unnecessary risk to broader market structure efforts. It would mean that even recently enacted compromises are still subject to near-immediate renegotiation, undermining the predictability that markets, consumers, and innovators depend on,” the group argued.
The Cryptocurrency Coalition also dismissed banks’ concerns about stability as a protectionist effort to maintain a monopoly on low-interest deposits.
The signatories argued that banks were simply trying to protect their profit margins by denying consumers access to the 4% yield currently available in the government bond market.
“The stablecoin rewards program allows platforms to share value directly with users, allowing households to benefit from a higher rate environment rather than absorbing losses due to inflation,” the crypto company claimed.
Gemini co-founder Tyler Winklevoss also publicly condemned the bank lobby’s maneuver, characterizing it as an attempt to “re-discuss a settled legislative issue.”
