šØ SENATE CRYPTO BILL: BANKS PUSH FOR STABLECOIN INTEREST BAN, OTHERS WARN OF FRAUD RISKS šØ
The draft Responsible Financial Innovation Act (RFI Act) for U.S. crypto market infrastructure is raising heated debate, especially over the issue of interest payments on stablecoins. Banking industry groups are lobbying for tighter restrictionsāgoing beyond the recently-passed GENIUS Act, which blocks issuers from paying interest but still allows exchanges to offer ārewardsā to stablecoin holders. Unlike Europeās MiCA regulations, which ban interest payments by both issuers and exchanges, the U.S. is yet to fully close this gap.
š Key Points
š¹ Banking Association Demands: Groups like the American Bankers Association and the Bank Policy Institute are pressing for new clauses in the RFI Act to prohibit crypto exchanges (not just stablecoin issuers) from paying interest, arguing that rewards for holding stablecoins undermine deposit security and blur lines with traditional banking.
š¹ Current Landscape: Coinbase, after ending its joint USDC issuance with Circle, now pays customers a 4.1% reward on USDC balances. The GENIUS Act tried to stop interest payments by issuers, but still leaves the door open for exchangesāa loophole banks want closed in the infrastructure bill.
š¹ Banking Concerns Beyond Interest: State banking associations are also raising alarms over fraud and consumer protection risks, noting that rapid changes in crypto infrastructure might expose clients to new kinds of scams or systemic vulnerabilities.
š¹ Regulatory Contrasts: Unlike the RFI Act and the GENIUS Act, Europeās MiCA regime takes a tougher line, barring interest by all parties and requiring strict consumer safety protocols.
š¹ Stakeholder Flood of Feedback: A brief public comment window saw a deluge of input from banks, regulators, securities watchdogs, and web3 organizationsāreflecting the intensity of industry interest and concern.
š” Why It Matters
š¹ Clarity for Crypto Banking: How Congress lands on the interest ban question will have major impacts on the competitiveness of stablecoins, the safety of consumer funds, and the roles of banks versus exchanges in the crypto economy.
š¹ Balancing Innovation and Safety: Ongoing debate highlights the difficulty of aligning consumer protection with innovation, as diverse interests pull for tighter or looser rules around incentives and market structure.
š¹ Global Regulatory Divergence: Differences between U.S. and European approaches could shape stablecoin designs, cross-border payments infrastructure, and where business migrates in the evolving digital economy.
Lawmakers and regulators face high stakes as they attempt to balance banking industry pressures, exchange practices, and the imperative for stable, fraud-resistant crypto markets in the next major round of U.S. crypto legislation.
https://www.ledgerinsights.com/senate-crypto-bill-banks-want-stablecoin-interest-ban-others-worry-re-fraud/