Banks Push To Block Stablecoin Yields

Core Viewpoint - U.S. banks are increasingly opposing stablecoin yield programs, arguing that allowing interest payments on stablecoins could destabilize traditional banking by draining deposits and affecting lending capabilities [2][4][5] Group 1: Banking Industry Concerns - More than 40 state banking associations and the American Bankers Association have urged Congress to strengthen the ban on interest payments for stablecoins as outlined in the GENIUS Act [4][5] - Banks argue that if stablecoins become yield-bearing, it would lead to a migration of deposits from banks to digital assets, undermining their ability to create credit [5][6] - The banking sector claims that stablecoins threaten their $187 billion annual profit from payment processing fees, framing the issue as one of financial stability [2][6] Group 2: Stablecoin Advocates' Position - Stablecoin proponents, including Coinbase, argue that the fears of deposit erosion are exaggerated, stating that banks currently hold $3.3 trillion in reserves at the Federal Reserve, which is nearly 20% of all bank deposits [7] - Coinbase's analysis suggests that stablecoins enhance the financial ecosystem and do not undermine lending, but rather modernize payment systems by reducing hidden fees [8][10] - The debate reflects a broader struggle over the future of finance, with stablecoin issuers seeking recognition as legitimate payment providers [18][19] Group 3: Legislative Context - The GENIUS Act, signed into law in July 2025, established a framework for stablecoins, requiring one-to-one backing with dollars or Treasuries and banning issuers from paying yields directly [11][12] - The law, however, allows exchanges and affiliates to offer rewards programs, which banks are now pushing to restrict [12] - Congress faces a critical decision on whether to entrench existing banking models or promote competition in the payments sector [11][19] Group 4: International Developments - Canadian firms are advancing plans to launch a regulated Canadian dollar stablecoin, highlighting how other countries are seizing stablecoin opportunities while the U.S. continues to debate [13][15] - The Canadian initiative aims to support economic sovereignty and capitalize on the growing demand for stablecoins [14][15] Group 5: Consumer Impact - The outcome of the stablecoin yield debate could significantly affect the cost and convenience of everyday transactions for consumers [16][17] - Surveys indicate widespread dissatisfaction with traditional banks, suggesting that expanding payment options could foster competition and lower costs across the financial system [17]