Odaily Planet News: U.S. community banks are pushing Congress to revise the GENIUS Act to close what they believe is a regulatory loophole that allows stablecoins to "effectively pay interest." The Community Bank Council of the American Bankers Association wrote to the Senate this week, stating that some stablecoin issuers are indirectly providing returns to token holders through third parties such as digital asset exchanges, thereby undermining the provision in the bill that prohibits stablecoins from paying interest.
The previous GENIUS Act explicitly prohibited stablecoin issuers from directly offering interest or returns to holders in order to prevent competition with bank savings accounts. The Community Bank Council pointed out that some trading platforms, including Coinbase and Kraken, are still providing reward mechanisms to specific stablecoin holders on their platforms, which could potentially affect community banks' ability to attract deposits and make loans. The organization is calling for the proposed legislation on crypto market structure currently under review to clearly prohibit affiliated parties or partners of stablecoin issuers from offering returns to token holders.
The report also mentioned that the Banking Policy Institute previously made similar requests, arguing that such practices could lead to a withdrawal of deposits from the traditional banking system. Meanwhile, crypto industry groups such as the Crypto Council for Innovation and the Blockchain Association opposed the proposal to the Senate, stating that payment stablecoins are not used for lending and that further tightening of regulations could stifle innovation and limit consumer choice. (Cointelegraph)