Core Insights - The article highlights the risks posed to small businesses and job creation by allowing payment stablecoin issuers and intermediaries to offer yield or interest on stablecoin holdings, emphasizing the need for Congress to extend prohibitions on such practices [1][2]. Group 1: Impact on Community Banks - Community banks play a crucial role in providing credit and banking services to local communities, supporting small-business innovation and economic growth [2][5]. - Allowing crypto exchanges to offer yield-like incentives on payment stablecoins could lead to a significant reduction in community bank lending by $850 billion, resulting from a $1.3 trillion decrease in deposits [2][5]. - Community banks currently hold $4.8 trillion in deposits, which fuel $4 trillion in total lending activity, indicating that any reduction in lending would severely impact access to credit in local communities [5]. Group 2: Effects on Small Businesses - Small-business lending is predominantly driven by community banks, with small-business loans at these banks being more than double the rate at regional and large banks [6]. - Local businesses are more likely to receive approval for credit applications at community banks, which are essential for job creation, as small businesses account for over half of the nation's job growth and nearly 73% of its workforce [6]. Group 3: Risks from Stablecoins - The Federal Reserve estimates that stablecoins could grow from $300 billion to trillions by the end of the decade, which raises concerns about the impact on bank deposits and lending [3]. - As retail deposits shift to stablecoins, banks may face increased liquidity risk and funding costs due to more concentrated, uninsured wholesale deposits [3][4]. - The pressures from stablecoins could lead to declining bank credit, particularly affecting small businesses that rely on relationship banking, potentially accelerating banking industry consolidation [4].

Core Insights - The Federal Deposit Insurance Corp. (FDIC) has proposed a rule to establish a process for banks to issue payment stablecoins under the GENIUS Act [1][9] - The proposed rule includes a tailored application process for stablecoin issuance, allowing for automatic approval of applications after 120 days if the FDIC does not act [2][9] Application Process - The new rule will add a section to Part 303 of the FDIC's regulations, detailing the criteria for stablecoin issuance applications [2] - Applications can only be denied if the proposed activity is deemed manifestly unsafe or unsound, with a requirement for the FDIC to notify applicants of their application status within 30 days [2][3] Regulatory Clarity - The FDIC aims to provide regulatory clarity regarding digital assets and tokenized deposits, with further rules expected to establish capital, liquidity, and risk management requirements for banks issuing stablecoins [3][4] Disclosure Requirements - Banks will need to submit detailed disclosures regarding reserves, capital, liquidity, governance, and anti-money laundering controls, while the FDIC will minimize duplicative paperwork [4] Special Assessments - The FDIC voted to reduce special assessments from banks to cover losses from recent bank failures, adjusting the rate from 3.36 basis points to 2.97 basis points [6][8] - Estimated losses from the failures of Silicon Valley Bank and Signature Bank are approximately $16.7 billion, slightly up from the previous estimate of $16.3 billion [7] Budget Reduction - The FDIC proposed a budget reduction of $436.7 million, a 16% decrease from 2025 spending levels, primarily through cuts in employee compensation and a reduction of over 1,300 employees [10][11]

Core Viewpoint - Circle submitted a comment letter to the U.S. Department of the Treasury regarding the GENIUS Act, advocating for a national framework for payment stablecoins that supports users, issuers, and intermediaries across U.S. markets [1] Policy Principles and Supervision - Circle proposes that payment stablecoins be fully backed by cash and high-quality liquid assets, kept separate from company funds, and redeemable at par on demand, with independent monthly checks and plain language reports for verification [3] - The company emphasizes a level playing field for both bank and nonbank issuers under a common prudential baseline, and calls for a reciprocal path for foreign regimes that meet GENIUS standards [4] - Circle supports predictable penalties and safe harbor protections for compliance with lawful orders, along with tested wind-down plans for quick and fair return of customer funds across borders [5] Market Use, Global Reach, and Accounting Treatment - Circle requests clarification from the Treasury on how permitted U.S. issuers can operate globally to ensure practical conversion between dollars and tokens for businesses [6] - The submission recommends that permitted payment stablecoins be treated as cash and cash equivalents for accounting and tax purposes, aligning financial reporting with the fully reserved model [7]

Core Viewpoint - Coinbase Global has urged the US Treasury Department to ensure that the upcoming rules for the GENIUS Act align with Congress's original intent to avoid excessive regulation that could hinder innovation in the crypto space [1][3][9] Regulatory Concerns - The exchange warned that excessive regulation could stifle innovation and undermine US leadership in the cryptocurrency sector [3] - Coinbase's Chief Policy Officer emphasized the need for regulations to adhere closely to the bill's text, ensuring US-issued stablecoins maintain their competitiveness as a global payment and settlement instrument [4] Scope of Regulation - Coinbase called for a narrow interpretation of the GENIUS Act, specifically excluding non-financial software developers, blockchain validators, and open-source protocols from regulatory oversight [4][9] - The company clarified that the prohibition on interest payments under the GENIUS Act applies only to stablecoin issuers, not to exchanges or intermediaries offering loyalty or rewards programs [5] Tax and Accounting Proposals - Coinbase proposed that payment stablecoins be recognized as cash equivalents for tax and accounting purposes, arguing that their design is similar to fiat currency [6] - The exchange urged the Treasury and the Internal Revenue Service to adopt a pragmatic approach to taxation for payment stablecoins to reduce the regulatory burden [6] Industry Impact - The GENIUS Act, enacted in July 2025, establishes the first federal framework for regulating stablecoins, requiring tokens to be fully backed by US dollars or equivalent liquid assets and mandating annual audits for large issuers [7] - Coinbase's comments reflect growing industry concerns regarding how the law's implementation could impact the balance between innovation, investor protection, and global competitiveness in the stablecoin sector [7][9] Position on Stablecoins - Coinbase rejected claims that the growth of stablecoins could deplete deposits from US banks, arguing instead that stablecoins reinforce the dollar's global dominance [8]