The GENIUS Act formally regulates stablecoins in the U.S., permitting bank-issued tokens while limiting direct interest on deposits; this could shift deposits toward exchanges offering yield, pressuring traditional banks and accelerating global stablecoin competition.
GENIUS Act allows regulated bank-issued stablecoins but restricts direct interest payments.
Exchanges and third parties may offer yield, creating competitive pressure on banks.
Historical data (Federal Reserve) and expert analysis suggest deposit flight risk if yields diverge.
Meta description: GENIUS Act stablecoin regulation reshapes finance, pressuring banks and accelerating global stablecoin competition — read implications and expert reactions.
What is the GENIUS Act and how does it regulate stablecoins?
The GENIUS Act is U.S. legislation that creates a regulatory framework for stablecoins, allowing regulated entities, including banks, to issue tokenized deposits while restricting banks from paying interest directly on those stablecoin balances. The law aims to increase oversight of the $288 billion stablecoin market and reduce systemic risk.
‘,
‘
🚀 Advanced Trading Tools Await You!
Maximize your potential. Join now and start trading!
‘,
‘
📈 Professional Trading Platform
Leverage advanced tools and a wide range of coins to boost your investments. Sign up now!
‘
];
var adplace = document.getElementById(“ads-bitget”);
if (adplace) {
var sessperindex = parseInt(sessionStorage.getItem(“adsindexBitget”));
var adsindex = isNaN(sessperindex) ? Math.floor(Math.random() * adscodesBitget.length) : sessperindex;
adplace.innerHTML = adscodesBitget[adsindex];
sessperindex = adsindex === adscodesBitget.length – 1 ? 0 : adsindex + 1;
sessionStorage.setItem(“adsindexBitget”, sessperindex);
}
})();
Banking groups raised concerns that limits on interest for bank-issued stablecoins, alongside permissive rules for third-party yield offerings, could divert deposits. Financial Times reported objections from major banking lobbies who called parts of the law a potential loophole.
Under this framework, customers seeking yield might migrate funds to platforms or exchanges that can provide returns through third-party mechanisms, creating competitive strain on deposit franchises constrained by regulatory caps.
Yes — historical precedent shows how higher-yield alternatives shift funds. Federal Reserve data highlights that during the early 1980s, money market alternatives siphoned deposits from banks as investors chased returns. Analysts at Citi and PwC warn that a sustained yield gap could produce comparable outflows in a tokenized environment.
Risk depends on how quickly exchanges scale yield products and how regulators enforce safeguards around redemption, liquidity, and reserve transparency.
‘
];
var adplace = document.getElementById(“ads-binance”);
if (adplace) {
var sessperindex = parseInt(sessionStorage.getItem(“adsindexBinance”));
var adsindex = isNaN(sessperindex) ? Math.floor(Math.random() * adscodesBinance.length) : sessperindex;
adplace.innerHTML = adscodesBinance[adsindex];
sessperindex = adsindex === adscodesBinance.length – 1 ? 0 : adsindex + 1;
sessionStorage.setItem(“adsindexBinance”, sessperindex);
}
})();
Source: https://en.coinotag.com/genius-act-could-prompt-bank-outflows-to-stablecoins-potentially-increasing-eth-demand/