US banking groups, led by the Bank Policy Institute (BPI), are pressing Congress to close a loophole in the GENIUS Act that they fear could allow stablecoin issuers to indirectly offer yields through affiliated companies, undermining the traditional banking system. In a recent letter, BPI warned that without addressing this issue, approximately $6.6 trillion could be withdrawn from traditional banks, disrupting credit flow to American businesses and families. While the GENIUS Act prohibits stablecoin issuers from offering yield to holders, it does not extend this ban to related crypto exchanges. The ability to offer yield is critical for attracting users to stablecoins, and the banking groups argue that such a shift could pose significant risks to the financial system and lead to higher interest rates and reduced loan availability for American households. Currently, the total market cap of stablecoins stands at $280.2 billion, a small fraction of the US dollar's money supply, yet the concerns highlighted by banking groups emphasize the potential impact of yield-bearing stablecoins on the broader financial landscape.

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