US banking groups are intensifying pressure on lawmakers to amend the recently passed GENIUS Act, warning that its current structure risks destabilizing the financial system by indirectly enabling crypto exchanges to offer yield on stablecoins.

It marks a subsequent attack from banking giants against crypto, after reports that they are trying to disrupt Coinbase and Robinhood.

Banks Warn Stablecoin Yield Rules Could Spark Trillion-Dollar Deposit Flight

The Financial Times reported pushback from the American Bankers Association, the Bank Policy Institute, and the Consumer Bankers Association.

Based on the report, these traditional finance (TradFi) players argue that the GENIUS Act, passed in July, contains a “loophole.”

The loophole would supposedly allow exchanges such as Coinbase and Binance to reward holders of stablecoins issued by third parties like Circle (USDC) or Tether (USDT).

While the Act explicitly bans issuers themselves from paying interest, banks claim that crypto platforms could exploit this gap. The banking groups fear this could spark mass deposit outflows from the traditional system.

Meanwhile, a US Treasury analysis earlier this year estimated that as much as $6.6 trillion in deposits could leave banks if stablecoins generate yield.

Banking lobbies warn that this shift would increase deposit flight risks, especially during times of stress. It would drive up borrowing costs, reduce lending capacity, and ultimately affect small businesses and households.

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Author: Lockridge Okoth

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