Executive Letter: Grassroots Needed on Digital Assets Legislation

By Rose Oswald Poels

WBA, ABA, ICBA, and other state banking associations worked hard to minimize the impact of the GENIUS Act as it moved through Congress earlier this year. We received assurances from elected officials that this stablecoin legislation was a “payments” bill, providing a framework and protections for stablecoins to be used as a form of payment in the United States. It was also clear that protecting the banking industry from any potential disintermediation remained a priority.

While the GENIUS Act language was not perfect, members of Congress indicated that any legislative “fixes” would be done through a separate market structure bill in the Senate. Since the passage of the GENIUS Act, WBA and other trade associations have expressed concern that loopholes within the law — if left unaddressed — could lead to deposits leaving the traditional banking system. Such a shift would ultimately harm local lending, as yield-bearing stablecoin issuers incentivize consumers to store their funds outside of banks. The unintended (or perhaps intended) consequences of stablecoins becoming more of a store of value instead of simply a form of payment are real and harmful for the banking system and the economy.

WBA urges all bankers to contact our U.S. Senators today to close the loopholes left open in the GENIUS Act in order to protect consumers, promote economic stability and preserve credit access. In particular, the ask to lawmakers is to:

• Extend restrictions on paying interest or yield on payment stablecoins to cover all market participants. This will help ensure that payment stablecoins serve as a payment tool while minimizing unintended consequences for the banking system and broader economy.

• Repeal section 16(d) of the GENIUS Act. This will protect consumers and competition by guaranteeing state banking authorities have the power to supervise out-of-state chartered uninsured depository institutions, leveling the playing field for all institutions operating within a state.

• Prohibit non-financial companies from issuing stablecoins, restricting the ability for deposits to be siphoned from community banks and therefore preserving local community access, preventing conflicts of interest, and the concentration of economic power.

Both ABA and ICBA have action centers where you can easily and quickly send these letters now.

Please share this message with your entire staff! The Senate markup on this legislation is coming soon so it is imperative that they hear our message now. The “other side” has already generated tens of thousands of contacts supporting passage of this market structure bill without closing these critical loopholes. Now is the time for the banking industry to be just as loud.