The Bank Policy Institute (BPI) says platforms like Coinbase and PayPal are taking advantage of a gap in the GENIUS Act, a law signed in July 2025 aimed at keeping stablecoins distinct from insured bank deposits.
Under the law, issuers such as Circle and Paxos can’t pay interest to stablecoin holders.
But here’s the catch: the restriction only applies to issuers. Middlemen – the exchanges and payment apps that distribute stablecoins – can still dangle generous yields to customers. Coinbase, for example, offers up to 4.1% on USDC, while PayPal pays as much as 3.7% on PYUSD.
BPI claims these rewards could spark a major deposit exodus from banks into stablecoins, making it harder for lenders to fund loans and potentially driving borrowing costs higher.
The group cites a U.S. Treasury estimate suggesting the outflow could swell to $6.6 trillion if nothing changes.
To head off that risk, BPI wants lawmakers to rewrite the GENIUS Act so it covers secondary market players.
Without that fix, the group argues, the incentives to shift funds out of banks will persist – creating what it sees as a long-term stability problem for the financial system.
For now, the rewards remain legal. But with the banking industry pushing hard for new restrictions, the fight over stablecoin yields could become one of the next big battles between Washington and the crypto sector.
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