Banking groups, including the American Bankers Association and the Bank Policy Institute, are calling on Congress to address apparent loopholes in the recently enacted GENIUS Act regarding stablecoins. They warn that the current law, while prohibiting direct interest payments from stablecoin issuers, allows for circumvention through exchanges offering rewards to stablecoin holders. This could lead to significant deposit flight, risking up to $6.6 trillion in bank deposits. Such a shift may disrupt traditional lending and increase borrowing costs, as indicated by a Treasury report. Despite some experts downplaying the immediate threat posed by stablecoins, the banking coalition is advocating for regulatory measures to prevent non-financial firms from issuing stablecoins and to tighten restrictions on interest payments. This comes as major crypto firms move to secure national banking charters under the new stablecoin framework, reflecting increasing industry momentum amidst ongoing regulatory discussions.

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