Banking groups say the legislation contains a dangerous flaw that could allow exchanges to pay yield on stablecoins, threatening a massive outflow of deposits from the traditional financial system.
The American Bankers Association and other trade bodies warn that if platforms like Coinbase or Binance can reward users for holding USDC or USDT, banks could lose a key advantage. A U.S. Treasury estimate earlier this year suggested as much as $6.6 trillion might exit deposits if stablecoins offered competitive returns. For lenders, that would mean higher funding costs and less room to lend.
The dispute comes as President Donald Trump has positioned himself as an ally of digital assets, and Treasury Secretary Scott Bessent has argued stablecoins could become major buyers of U.S. bonds. The Federal Reserve has also softened its stance, with Governor Christopher Waller calling tokenization and smart contracts tools for mainstream use.
Exchanges and industry groups reject the banking lobby’s warnings, framing them as an attempt to block competition. Coinbase’s legal chief Paul Grewal said Congress and the White House have already rejected similar arguments.
The clash underscores a broader shift: banks are experimenting with tokenized securities while simultaneously warning about stablecoin risks. To crypto advocates, that looks less like consumer protection and more like balance-sheet protection.
How lawmakers handle the GENIUS Act will help decide whether stablecoins stay a side-show or evolve into a full-fledged alternative to bank deposits — a decision that could reshape U.S. finance for decades.
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