In their correspondence, the associations emphasized the importance of establishing a clear regulatory framework for the digital asset market. They underscored that the decisions made could significantly influence the structure, efficiency, and fairness of the financial system for years to come.
The associations argue that such practices distort market dynamics and may hinder credit creation by diverting deposits into stablecoins chasing higher yields.
To protect the traditional banking system and maintain its role in credit intermediation, the banking groups urged Congress to extend the prohibition on interest payments to include digital asset exchanges, brokers, dealers, and related entities.
The banking associations argue that this provision undermines the dual banking system, which they deemed is crucial for ensuring the safety and soundness of financial operations across state lines.
They called for the repeal of this section to reaffirm state authority in licensing and supervising financial institutions, thereby ensuring consumer protection and a level playing field for all operators.
Additionally, the associations urged lawmakers to close “loopholes” that permit nonfinancial companies to act as payment stablecoin issuers.
The letter alleges that the separation of banking and commerce has historically protected the US financial system from conflicts of interest and excessive concentration of economic power.
Featured image from DALL-E, chart from TradingView.com
