In the wake of the recent passage of the GENIUS Act, a new law regulating stablecoins, tensions have emerged between traditional banking associations and cryptocurrency advocacy groups.
These letters aim to revisit issues that they argue were thoroughly addressed during the legislative process of the GENIUS Act. The groups contend that the proposals threaten to create an uncompetitive environment for stablecoins, prioritizing the interests of banks over broader industry growth, competition, and consumer choice.
According to the GENIUS Act, stablecoin issuers are required to maintain one-to-one reserves in cash or high-quality liquid assets and operate under federal or qualified state licensing and supervision.
The advocacy groups also addressed claims that certain practices, such as exchanges sharing rewards, undermine the GENIUS Act’s prohibition on issuer-paid interest.
They argue that a level playing field is essential, allowing both banks and crypto firms to innovate and compete, particularly for underbanked consumers who increasingly rely on digital wallets.
The letter further warns that eliminating features available to stablecoin users, while permitting them for banks, would unfairly favor larger legacy institutions that often fail to provide competitive returns.
The advocacy groups argue that repealing this provision would hinder stablecoin redemption rights for out-of-state holders, potentially creating a fragmented regulatory environment that stifles interstate commerce.
Additionally, the call to ban non-financial companies from issuing payment stablecoins is seen as an extreme measure that could stifle innovation.
They argue that allowing responsibly regulated platforms to share benefits with customers is not a loophole but rather a feature that enhances financial inclusion and fosters innovation.
Featured image from DALL-E, chart from TradingView.com
