The bank lobby’s requested changes to the stablecoin-regulating GENIUS Act could undermine competition and weaken the US dollar’s global position, crypto executives and industry groups have claimed.
Crypto advocacy group the Blockchain Association said on Tuesday that a bid to lawmakers by a group of community bankers to ban issuers from offering yield to tokenholders through third parties was “a last-ditch effort by Big Banks to block competition after Congress struck a careful, bipartisan deal.”
The GENIUS Act bans stablecoin issuers from offering interest or yield, but major crypto exchanges are still rewarding stablecoin holders, and community banks argued that closing the claimed loophole is crucial for protecting their lending abilities.
“No evidence” stablecoin adoption will hurt banks
The Blockchain Association said there is “no evidence of stablecoin adoption dismantling traditional financial institutions.”
The Association said that while low-yield bank accounts primarily benefit “large incumbents,” stablecoin rewards offer greater benefit to the everyday person.
“No new evidence. No new risks. Just incumbent pressure to shut out competition,” the Blockchain Association said.
Pro-crypto lawyer John Deaton said on Wednesday that such a significant change to the legislation would be “a national security trap,” claiming it would incentivize the use of China’s interest-bearing digital yuan.
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“The stakes are higher than ever because China officially began paying interest on the Digital Yuan (e-CNY) – making it a ‘yield-bearing’ competitor to the USD,” Deaton said.
Alexander Grieve, the government affairs vice president at Paradigm, warned that undoing the GENIUS Act’s rewards provisions would “squander” progress.
“Now, after false and alarmist bank cries, they’re looking to undo a key part: rewards,” Grieve said.
Meanwhile, Galaxy Digital CEO Mike Novogratz echoed similar frustration and the US “would be fools” to reverse the law.
“What I say to banks who are whining like mad 4th graders. Toughen up and compete. This is what innovation looks like.”
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