American bankers are urging the US Treasury Department to enforce the prohibition on interest for payment stablecoins in the GENIUS Act. In response, cryptocurrency exchange Coinbase, has called on the Treasury to ensure that the forthcoming regulations align with Congress’s original intentions regarding the act.
However, companies like Coinbase are exploring a potential loophole that they believe allows them to continue offering yields on stablecoin deposits. They argue that since these platforms are not the issuers of the stablecoins, the prohibition does not apply to them.
The letter warned that any misinterpretation of the GENIUS Act could harm consumers by eliminating market-based incentives that reduce payment costs, encourage merchant acceptance, and assist new users in adopting regulated US stablecoins.
The response from the banking sector was robust, with the Consumer Bankers Association, the American Bankers Association, the Bank Policy Institute, the Financial Services Forum, and The Clearing House Association collectively representing the interests of American banks.
They cautioned that allowing stablecoin interest would effectively transform these digital assets into investment products, which could lead consumers to perceive stablecoins as akin to bank accounts, potentially resulting in a “deposit flight” that threatens banks’ ability to generate credit.
They posited that treating payment stablecoins as debt would introduce unnecessary complexity into the financial system. Instead, Coinbase advocated for these stablecoins to be considered cash equivalents, which would simplify their tax treatment and support their intended use as payment mechanisms.
Featured image from DALL-E, chart from TradingView.com
