A coalition of more than 125 cryptocurrency companies and advocacy groups has launched a coordinated offensive against US banking lobbyists. The group includes major crypto firms such as Coinbase, Gemini, and Kraken.
The move escalates a high-stakes battle over who has the right to pay interest on stablecoin deposits.
Why Banks Are Lobbying to Tweak the GENIUS Act
The main bone of contention is that the GENIUS Act explicitly prohibits stablecoin issuers like Tether from paying dividends.
However, there is currently a loophole that allows third-party platforms, such as crypto exchanges, to pass this stablecoin yield on to users.
As a result, traditional banking groups are aggressively lobbying to close this avenue, arguing that it constitutes regulatory arbitrage.
The banking lobby contends that if unregulated fintech platforms are allowed to offer high yields on cash-equivalent tokens, it poses a systemic risk to the traditional financial architecture.
In briefings with Capitol Hill, they warned that preserving the current rules could trigger a massive capital flight. They estimated potential deposit outflows of up to $6.6 trillion from commercial banks to digital asset platforms.
Such a shift, they argue, would hollow out the capital base that banks use to underwrite mortgages and business loans. That erosion would force lenders to shrink capacity and raise borrowing costs for American households.
Crypto Coalition Fights Back
In a December 18 letter to the US Senate Committee on Banking, the crypto coalition urged lawmakers to reject attempts to expand the scope of the recently enacted GENIUS Act.
“Reopening this issue before the GENIUS Act’s implementation would weaken the certainty that defines Congressional-enacted regulatory frameworks and introduce unnecessary risk into the broader market structure effort. It would signal that even recently enacted compromises remain subject to almost immediate renegotiation, undermining the predictability that markets, consumers, and innovators rely on,” the group argued.
The crypto coalition also dismissed the banks’ concerns about stability as a protectionist effort to maintain a monopoly on low-interest deposits.
The signatories argued that banks are merely trying to protect their profit margins by preventing consumers from accessing the 4% yields currently available in the Treasury market.
“Stablecoins rewards programs enable platforms to share value directly with users, helping households benefit from higher-rate environments rather than absorbing losses to inflation,” the crypto firms argued.
Tyler Winklevoss, co-founder of Gemini, also publicly slammed the banking lobby’s maneuver, characterizing it as an attempt to “relitigate a settled legislative issue.”
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