A gaggle of US neighborhood bankers is pressuring Congress to alter the GENIUS Act to shut a supposed “loophole” that permits yield-generating stablecoins to undercut banks.
The American Bankers Affiliation’s Neighborhood Bankers Council stated in a letter on Monday to the Senate that it should tighten the stablecoin regulating invoice handed final yr to cease stablecoin issuers from providing yield to tokenholders by third events.
“Some firms have exploited a perceived loophole permitting stablecoin issuers to not directly fund funds to stablecoin holders by digital asset exchanges and different companions,” the group of greater than 200 neighborhood financial institution leaders stated.
The GENIUS Act banned stablecoin issuers from providing curiosity or yield to holders, with lawmakers agreeing with the financial institution foyer that it might put such tokens in competitors with financial institution financial savings accounts.
Nevertheless, exchanges reminiscent of Coinbase and Kraken supply rewards to those that maintain sure stablecoins on their platform, with the Neighborhood Bankers Council arguing that closing the loophole was essential because it impacts its banks’ lending talents.
“With this exercise, the exception swallows the rule,” the group stated. “If billions are displaced from neighborhood financial institution lending, small companies, farmers, college students, and residential patrons in cities like ours will undergo.”
The council argued that exchanges and a “constellation of stablecoin-affiliated firms will not be designed to fill the lending hole” and couldn’t supply merchandise insured by regulators.
It requested lawmakers to place a prohibition on associates and companions of stablecoin issuers providing curiosity in crypto market construction laws that’s at the moment making its method by Congress.
Banks push for GENIUS Act modifications
The council’s letter is the most recent push by a financial institution advocacy group to amend the GENIUS Act, with the Banking Coverage Institute main a cohort of teams which are pressuring lawmakers to take motion.
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The institute, led by JPMorgan CEO Jamie Dimon, wrote to lawmakers in August asking for a similar claimed loophole to be closed, arguing that it might set off $6.6 trillion in deposit outflows from the normal banking system.
Two main crypto advocacy teams, the Crypto Council for Innovation and the Blockchain Affiliation, rebuffed the banks in a letter to the Senate Banking Committee that very same month, arguing “cost stablecoins will not be used to fund loans” and that the revisions would stifle innovation and shopper alternative.
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