šØ BANKS ARGUE GENIUS ACT BANS ALL STABLECOIN INTEREST šØ
U.S. banking industry groups have submitted powerful arguments to the Treasury, asserting that the recently enacted GENIUS Act must be broadly interpreted to impose a blanket ban on paying interest or rewards on stablecoins. This interpretation is a direct effort to curb the competitive threat posed by high rewards offered by crypto exchanges.
š Key Points:
š¹ The Core Conflict: The primary issue is the fierce competition for deposits, as crypto exchanges like Coinbase offer rewards on stablecoin balances that significantly exceed traditional bank deposit rates.
š¹ GENIUS Act's Stance: The GENIUS Act explicitly blocks stablecoin issuers from paying interest or rewards on stablecoin balances. This measure was intended, in part, to protect the traditional bank deposits that support credit financing in the economy.
š¹ The Loophole: The Act's language did not explicitly address rewards paid indirectly by non-issuers, which is how platforms like Coinbase currently operate.
š¹ Banks' Interpretation: U.S. banking associations (the "joint trades" ) argue that both the statutory language and the legislation's underlying objectives support a broad interpretation of the ban, encompassing indirect payments.
š¹ Broad Definition of Interest: The banking groups highlight that the Act's definition of "remuneration" is wide-ranging, including "any form of interest or yield (whether in cash, tokens, or other consideration)," suggesting it covers any economic benefit.
š¹ Narrow Interpretation Concern: A narrow interpretation could still allow some non-issuers, such as PayPal, to continue offering rewards on their stablecoin balances, as they are not the technical issuer.
š” Why It Matters:
š¹ Regulatory Clarity: The banking industry's push for a broad ban is an attempt to influence the forthcoming detailed regulations that the U.S. Treasury must formulate to flesh out the high-level directives of the GENIUS Act.
š¹ Protection of Deposits: The debate centers on shielding the fractional-reserve banking system by preventing digital assets from siphoning away the conventional deposits that banks rely on for lending.
š¹ Crypto Industry's Pushback: Crypto exchanges like Coinbase are advocating for the Treasury to stick strictly to the original, narrow wording of the Act, which would allow them to continue offering competitive rewards.
The Treasury's final regulations will determine whether the GENIUS Act effectively protects bank deposits by shutting down all forms of stablecoin interest or if crypto exchanges can maintain their competitive advantage through indirect reward structures.
https://www.ledgerinsights.com/banks-make-compelling-case-that-genius-act-bans-all-stablecoin-interest/