Five prominent banking trade associations are expressing opposition to the latest Senate stablecoin rewards proposal, saying that the compromise language “falls short” of adequately prohibiting yield on stablecoins. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America have all stated that there are existing “loopholes” in the draft that could drain deposits from community banks.
Why the stablecoin rewards proposal falls short?
The bankers coalition’s submission recognizes that Senators Tillis and Alsobrooks are “seeking to achieve the correct policy goal; prohibiting the payment of yield and interest on stablecoins.” However, they argue that as drafted, the language would still permit exchanges and other crypto intermediaries to pay interest or yield through “membership programs” as long as payments are not “calculated or distributed like banks’ payment or distribution of interest or yield.”
The coalition firmly objects to provisions allowing rewards tied to duration, balance, and tenure. On this point, they say that “overtly incentivizing the idle holding of payment stablecoins for an extended time” would “negate the goals of the upfront ban” while tying rewards directly to how much and how long customers hold their funds. The coalition’s research indicates that yield-earning stablecoins could reduce all consumer/small business/farmer loans by at least 20 percent, or more.
“We will be sharing our detailed suggestions for strengthening the proposed language with lawmakers in the coming days, and we will continue to work in good faith to help Congress embrace innovation while protecting the deposits that drive local lending and economic activity in their communities,” the coalition said.
On the other hand, Consensys has also flagged three specific and critical issues through a formal comment letter on the Office of the Comptroller of the Currency (OCC) stablecoin framework implementing the GENIUS Act, stating that the current scheme diverges from Congress’s authorization, which could crash innovation.
What Senator Lummis suggests
Senator Cynthia Lummis has been a key voice in the stablecoin debate, helping to create a framework that provides for innovation while also protecting consumers. Lummis is proactively pushing the CLARITY Act to pass immediately; otherwise, with no clear rules, jobs, businesses, and related innovation could flee overseas to more crypto-friendly jurisdictions. “This is our last chance!” she stated.
Meanwhile, banking institutions are pressing for specific language that will clearly prohibit any yield, interest, or reward that may be viewed as competing with bank deposit accounts.
