The US banking lobby, led by the Banking Policy Institute (BPI), has expressed concerns about interest-bearing stablecoins and their impact on financial systems, urging Congress to close potential loopholes in the GENIUS Act, which regulates the stablecoin industry. Stablecoins are seen by the BPI as a risk to traditional credit systems, claiming that shifts away from bank deposits could raise lending costs and decrease business loans. Proponents of stablecoins, including Coinbase's CEO, argue for the potential benefits of offering interest-bearing stablecoins, while legal experts highlight the complexities surrounding compliance and investor protection. The GENIUS Act explicitly prohibits stablecoin issuers from paying interest, but interpretations suggest there are avenues for such practices through exchanges. The BPI warns that promoting stablecoins could lead to unregulated 'shadow banks' and financial instability. Some argue, however, that the banking lobby's push against stablecoins may stem more from a desire to protect traditional banking models rather than genuine regulatory concerns. As the dynamics between banking and crypto evolve, the long-term outcome for investors remains uncertain.

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