GENIUS Act Backlash: Banks Push to Kill Stablecoin Rewards

Core Insights - US lawmakers are considering changes to the GENIUS Act, influenced by banking groups urging Congress to restrict third-party rewards on stablecoins, amidst a stablecoin supply surpassing $316 billion, indicating significant reliance on dollar-pegged tokens for transactions and savings [1][2] Group 1: GENIUS Act Overview - The GENIUS Act establishes foundational regulations for stablecoins, requiring issuers to maintain real dollar reserves and adhere to strict oversight, functioning similarly to cash in a digital format without intermediary banks [3] - The act prohibits issuers from directly paying interest, although crypto platforms can still incentivize users through trading fees or lending returns, which banks are now seeking to limit [4] Group 2: Industry Reactions - Industry representatives argue that banks are motivated by competitive fears rather than genuine risks, emphasizing that the legislation aims to balance safety with innovation [5] - The Blockchain Association supports this perspective, asserting that there is no evidence to suggest that stablecoins undermine banks, and that rewards primarily benefit everyday users rather than large financial institutions [6] Group 3: Potential Implications - If Congress aligns with banking interests, stablecoins may become less attractive, resembling traditional checking accounts without the benefits, which could hinder adoption and negatively impact DeFi applications that depend on stablecoin liquidity [7]