In short
- Greater than 200 group financial institution leaders have warned that crypto corporations are exploiting regulatory gaps within the GENIUS Act.
- The ABA estimates as much as $6.6 trillion in deposits might flee to yield-bearing stablecoins, threatening credit score availability.
- The OCC chief had beforehand downplayed banks’ considerations, saying any materials deposit flight "wouldn’t occur in a single day."
Group banks need to shut a loophole in federal stablecoin guidelines, urging U.S. senators to tighten oversight of yield-based workarounds.
The American Bankers Affiliation's Group Bankers Council despatched a letter to lawmakers on Monday, warning that crypto corporations are skirting the GENIUS Act's ban on stablecoin curiosity funds by funneling rewards via affiliated exchanges.
New as we speak – group financial institution leaders urge Senate to guard native lending from stablecoin dangers: https://t.co/SfvgUtp3Jk pic.twitter.com/TbmPUvk72s
— American Bankers Affiliation (@ABABankers) January 6, 2026
Greater than 200 group financial institution leaders expressed concern that whereas the regulation prohibits stablecoin issuers from paying curiosity, a safeguard to make sure deposits fund loans for households and small companies, some corporations are circumventing Congressional intent via oblique funds.
"Group banks are the spine of native economies," the letter mentioned. "Permitting inducements like curiosity or rewards on stablecoins might incentivize prospects to maneuver financial savings out of banks, jeopardizing the lending that fuels development in cities throughout America."
The letter warns that with out stronger legislative readability, as much as $6.6 trillion in deposits might be in danger, threatening credit score availability nationwide, citing a U.S. Treasury report from final 12 months.
The ABA's Group Bankers Council is looking on Congress to make clear that the curiosity prohibition applies to stablecoin issuers' associates and companions.
"Something much less will put financial development and native communities in danger," the letter concludes.
The banking trade has been sounding alarms for the reason that passage of the GENIUS Act final July, with the ABA, Financial institution Coverage Institute, and over 50 state banking teams writing to Congress in August to warn that "the restriction is well bypassed as a result of exchanges or different third events can nonetheless provide rewards to stablecoin holders."
Nevertheless, Jonathan Gould, head of the Workplace of the Comptroller of the Forex, downplayed considerations on the ABA's Annual Conference final October, saying any materials deposit flight "wouldn’t occur in unnoticed trend" and "wouldn’t occur in a single day."
"If there have been to be a fabric flight from the banking system, I might be taking motion," Gould mentioned, noting that "extremely elected officers" and commerce associations would additionally intervene.
Crypto trade pushback
Saravanan Pandian, CEO of crypto trade KoinBX, advised Decrypt that banks’ push to evaluation the GENIUS Act factors to conventional warning towards digital belongings, however warned that "strict insurance policies can push exercise in the direction of unverified channels, which might finally find yourself being difficult for all stakeholders."
He expressed hope for a system the place “banks and crypto platforms can exist via mutual co-operation and innovate collectively.”
Nitesh Mishra, co-founder and CTO at hedging platform ChaiDEX, advised Decrypt the $6.6 trillion danger is "considerably blown out of proportion," however acknowledged banks are "directionally proper" since stablecoins present related returns "with out the equal guidelines confronted by the banks."
Mishra known as for "clear definition between curiosity and reward" and urged regulators to "impose sturdy reserve, liquidity, and disclosure requirements plus activity-based licensing for nonbank issuers, so banks and stablecoin corporations compete below comparable guidelines with out stifling innovation."
CoinGecko information pegs the stablecoin market at over $312 billion, however customers of prediction market Myriad, owned by Decrypt’s mother or father firm Dastan, place only a 3% probability on it breaking the $360 billion barrier by February.
