U.S. Trade Groups Push Stablecoin Interest Ban
- U.S. banking leaders seek tighter stablecoin interest regulations.
- Banks claim interest ban preserves traditional lending.
- Crypto advocates argue ban hinders blockchain innovation.
CEOs of major U.S. banking and credit union associations have urged Congress to prohibit interest payments on payment stablecoins, emphasizing the risk to local lending markets.
This move could prevent multitrillion-dollar fund outflows from traditional banks, safeguarding community lending while potentially stifling innovation in the cryptocurrency sector.
Leaders from major U.S. banking and credit union associations have urged Congress to prohibit interest on stablecoins. They warned that stablecoins could undermine bank deposits vital for local lending.
The banking groups, including the American Bankers Association, called for closing legislative gaps. They emphasized the vital role of deposits in supporting loans for homes, businesses, and agriculture, stating:
“Every deposit represents a home loan, a small business loan or an agricultural loan. Simply stated, policies that undermine bank and credit union deposits destroy local lending.”
The proposed ban has implications on local lending industries reliant on deposits. By eliminating yields, the industry seeks to mitigate potential multitrillion-dollar deposit outflows.
Stablecoin supporters, such as the Blockchain Association, argue that restricting yields may stifle innovation and limit the fintech sector’s growth. The debate indicates a significant financial and regulatory tension.
Analysts suggest that banning stablecoin interest could strengthen traditional banking while challenging crypto platforms to adapt. The move marks a potential shift in how crypto and traditional finance may coexist.
Historical trends, such as precedents set by the GENIUS Act, highlight tensions between protecting incumbent banks and fostering tech innovation.
“History instructs us that we should not shortchange innovation in favor of protecting incumbent interests. Right now, the banking lobby is pushing hard to upend the bargain Congress struck in the GENIUS Act.”
