US banks have united to change the new stablecoin law due to fears they will pay trillions of dollars’ worth of outflows.
Lobbies, including the American Bankers Association, the Bank Policy Institute, and the Consumer Bankers Association, have warned regulators of an alleged loophole in the rule that would allow some crypto exchanges to indirectly pay interest to stablecoin holders. This reflects the growing competition between Wall Street and the crypto industry.
Banks vs crypto firms
The GENIUS Act was passed in July 2025 and regulates the USD 288 billion global stablecoin market, prohibiting issuers from paying yield to consumers. Under these rules, banks will be allowed to issue their own stablecoins, but restricted from paying any interest. However, crypto exchanges will be able to do so indirectly, offering rewards to those who hold stablecoins issued by third parties such as Circle’s USDC or Tether’s USDT.
Banks believe that this will create an uneven playing field and spark mass deposit outflows away from them, as customers will choose to earn interest by holding stablecoins at crypto exchanges rather than USD at banks. A US Treasury report published in April estimated that a scenario like this could have banks lose USD 6.6 trillion of deposits, depending on whether stablecoins can offer yield.
Banks' representatives warned that greater deposit flight risk, especially in times of uncertainty, will undermine credit creation in the current economy, resulting in higher interest rates, fewer loans, and increased costs for Main Street businesses and households. A Citi spokesperson compared the potential scenario with the rise of money market funds in the 1980s, which had more attractive interest rates than current accounts, most of which do not reward customers.
Crypto firms are responding, saying that the banks’ push to change the rule is anti-competitive. The Crypto Council for Innovation and the Blockchain Association wrote that banks are creating an uncompetitive environment that protects them at the expense of broader industry growth and consumer choice.
