Major banking groups in the United States are calling for amendments to the recently passed Genius StableCoin Act, citing concerns that certain provisions of the law may unfairly impact the traditional financial industry. The banking sector’s concerns center around the potential for an uneven competitive landscape, which could jeopardize the future of traditional financial institutions.
Summary of the Concerns
The Genius StableCoin Act, passed in July, is the first official law in the United States to regulate the billion-dollar stablecoin market. One of the key provisions of the law prohibits issuers from paying interest or returns to stablecoin holders, a measure aimed at maintaining stability in the system. However, this provision has raised concerns among banking groups, who argue that it creates a “loophole” that favors crypto exchanges over traditional banks.
According to the banking groups, the provision means that banks can issue their own stablecoins but are forbidden from offering interest, while crypto exchanges can still provide rewards to stablecoin owners from third-party providers. This, they claim, could lead to a shift in deposits from traditional banks to platforms that offer higher returns, creating an uneven competitive field.
Pushback from the Crypto Industry
Representatives of the crypto industry have pushed back against the banking sector’s concerns, arguing that the “loophole” described in the Genius Act is not a mistake but a necessary feature to maintain competition and innovation in the industry. Interest groups, including the Crypto Council for Innovation and the Blockchain Association, claim that restricting crypto exchanges from providing rewards to stablecoin owners would wrongly protect banks and restrict consumer choice.
Industry figures, such as Paul Grewal, Chief Legal Officer of Coinbase, have also condemned the concerns, emphasizing that the industry can develop without unnecessary restrictions. The Genius StableCoin Act was celebrated as a regulatory milestone for the industry, providing long-awaited clarity for the asset class. However, the ongoing dispute highlights the tensions that arise when designing rules and underlines the need for careful balance to ensure both innovation and stability.
The US Department of Finance estimated in a report in April that stablecoin providers could potentially siphon off up to $6.6 trillion from the traditional banking system, warning that such outflows could endanger the stability of the banking sector. The banking groups have cited this report in their campaign to amend the Genius Act, arguing that the provision could have far-reaching consequences for the traditional financial industry.
Despite the concerns, the crypto industry remains optimistic about the future of stablecoins and the potential for innovation and growth in the sector. As the regulatory landscape continues to evolve, it is likely that we will see further debate and discussion around the Genius StableCoin Act and its provisions.
For more information on the Genius StableCoin Act and its implications for the traditional financial industry and the crypto sector, please visit: https://crypto.news/u-s-banks-move-to-amend-genius-stablecoin-act-over-loophole/
