Wall Street is pushing for changes to certain aspects of the new U.S. stablecoin legislation, which was praised by President Donald Trump and the cryptocurrency industry as a significant step towards regulating the U.S. sector. Surprisingly, banks are teaming up with consumer advocates to raise concerns about potential threats to the existing financial system.
The American Bankers Association and other bank lobbying groups have joined forces with Americans for Financial Reform and the National Consumer Law Center to request revisions to the stablecoin law, known as the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. One contentious provision allows a stablecoin-issuing subsidiary of a state-chartered uninsured depository institution to provide money-transmission and custody services nationwide, circumventing state licensing and oversight.
In a recent letter to key U.S. senators, the banking industry urged the removal of this section, citing concerns about regulatory loopholes and potential unfair advantages for certain institutions. They also highlighted the risks posed by crypto firms offering returns on stablecoins, which could divert deposits and disrupt money-market fund activities.
The banking groups, including the ABA, Bank Policy Institute, and Financial Services Forum, emphasized the importance of safeguarding credit flow to businesses and families by addressing the loophole in the stablecoin law. While the GENIUS Act has been signed into law, a more comprehensive bill to regulate U.S. crypto markets is still pending, presenting an opportunity to refine existing provisions before final implementation.
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