A month after President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the nation’s top banking lobbies are already calling for changes.
Their message to Congress: the law leaves dangerous gaps that could undermine lending and shake financial stability.
The American Bankers Association (ABA) and 52 other trade groups argue that while the legislation stops stablecoin issuers from paying interest to holders, it fails to stop related entities — like exchanges, brokers, or dealers — from offering similar incentives. According to the bankers, this loophole could lure deposits away from the traditional banking system and into stablecoins chasing yield, shrinking the pool of capital banks use to make loans.
They’re pushing for the ban to be broadened to cover any affiliated company, warning that unchecked interest payments could turn stablecoins into store-of-value assets rather than payment tools. That shift, they say, would distort incentives and hurt the credit creation process.
A Fight Over Market Share
The stakes are high. BlackRock’s IBIT Bitcoin ETF alone holds more than $90 billion, and stablecoins are already embedded in global crypto markets. If yield-bearing stablecoins start competing directly with bank deposits, the groups warn, lending costs could rise, loan availability could shrink, and households and businesses could feel the pinch.
Several banking bodies — including the Bank Policy Institute and the Financial Services Forum — have also raised the alarm about the risk of deposit flight during periods of stress. In their view, any large-scale move of capital into stablecoins could trigger tighter credit conditions across the economy.
Coinbase Fires Back
Coinbase Chief Legal Officer Paul Grewal dismissed these warnings, calling them an attempt to block competition. Writing on X, he said lawmakers from both parties had already rejected “unrestrained efforts to avoid competition” and that the industry should “move on.”
For now, the GENIUS Act remains in force as written, but the tension between Wall Street banks and digital asset firms underscores a broader battle: how to modernize payments without destabilizing the credit system that underpins the U.S. economy.
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Source: https://coindoo.com/banks-warn-of-credit-risks-clash-with-coinbase-over-stablecoin-law/