A coalition of US banking organizations, led by the Bank Policy Institute (BPI), has sounded the alarm over a possible $6.6 trillion outflow from the banking sector to stablecoins in response to the recently enacted GENIUS Act.
Banks highlight loophole in stablecoin bill
In a statement released on August 12, the BPI noted that while the GENIUS Act prevents stablecoin issuers from offering direct yields to holders, the law does not address the possibility of crypto exchanges or related firms partnering with issuers to deliver indirect yields.
The group estimated that this could result in a significant transfer of customer deposits out of banks and into digital assets.
The banking coalition warned that such a shift could reduce lending capacity, push interest rates higher, and increase borrowing costs across the economy.
They urged Congress to address the issue, stating:
“Congress must protect the flow of credit to American businesses and families and the stability of the most important financial market by closing the stablecoin payment of interest loophole.”
Coinbase and industry push back
Leaders in the digital asset sector quickly challenged the banks’ concerns.
Paul Grewal, Chief Legal Officer at Coinbase, argued that these fears are exaggerated and have already been considered and dismissed by Congress. Grewal stated:
“This was no loophole and you know it. 376 Democrats and Republicans in the House and Senate rejected your unrestrained effort to avoid competition. So did one President.”
Coinbase CEO Brian Armstrong suggested the banks’ position was more about protecting profits than guarding against systemic risk.
Variant Fund CLO Jake Chervinsky echoed this, noting that the banks’ regulatory influence had been rebuffed.
Calls for increased banking competition
Mikko Ohtama, co-founder of Trading Protocol, observed that the traditional banking sector is threatened by the potential for stablecoins to offer more competitive options for savers. He commented:
“The banks need to give more competitive offers for savings accounts and such. This kind of competition would be better for the customers of the banks. It’s a simple process: people won’t move money out of banks if the banks give them a good deal.”
