The cryptocurrency industry is launching a counterattack against the banking sector's efforts to alter the US's newly enacted stablecoin law, claiming that attempts to roll back crucial provisions of the GENIUS Act would unfairly favor traditional banks. In a letter to the Senate Banking Committee dated August 19, the Crypto Council for Innovation and the Blockchain Association urged lawmakers to reject proposals from banking groups that sought to remove Section 16(d) of the law and prohibit yield programs offered by affiliates of stablecoin issuers. This section allows subsidiaries of state-chartered institutions to facilitate money transmission across state lines in support of stablecoin issuer activities, enabling holders to redeem their tokens nationwide without needing separate state licenses.
Banking groups had previously warned that allowing state-chartered, uninsured institutions to issue stablecoins and operate nationwide would lead to regulatory arbitrage, bypassing state licensing regimes. They also argued that the law contains a loophole by banning issuers themselves from offering interest but not preventing affiliates or exchanges from doing so, which they claim could result in a significant loss of deposits from the US banking system. The crypto groups' letter dismissed these concerns as unsupported by empirical data, citing a July 2025 study that found no statistically significant link between stablecoin adoption and community bank deposit outflows.
Instead, they pointed out that most stablecoin reserves remain within the financial system, supporting lending. The groups argued that allowing affiliates to share rewards with stablecoin users promotes fair competition, particularly for underbanked consumers who are underserved by traditional banks. At present, the average US checking account pays a mere 0.07% APY, far below inflation, while the Federal Reserve's benchmark interest rate stands at 4.25%-4.50%.
The crypto groups contend that eliminating these features for stablecoin users while allowing them in the banking sector would unfairly favor legacy institutions. The GENIUS Act is currently law, but the Digital Asset Market Clarity Act, a broader crypto markets framework, could still reshape stablecoin policy before regulators draft implementing rules. Bankers are attempting to use this process to advance their agenda, while crypto groups are lobbying to maintain the law in its current form. Republican Tim Scott, the Senate Banking chairman, expects the bill to be finalized by the end of September and believes as many as 18 Democrats may vote for it, although he acknowledges potential resistance from certain lawmakers.