U.S. community banks warn GENIUS Act loophole threatens financial stability
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The American Bankers Association’s Community Bankers Council said on Monday that it’s making efforts to address a flaw in the recently passed GENIUS Act. The council plans to close a supposed loophole that allows stablecoin issuers to indirectly fund payments to stablecoin holders via crypto exchanges. The council members stated in a letter to the Senate that the GENIUS Act, passed last year, could limit deposits in local banks and disadvantage small businesses and households. The legislation banned stablecoin issuers from offering interest or yield to holders, since the initiative could put such digital assets in competition with bank savings accounts. GENIUS Act flaw threatens local banks’ lending dynamics Back in July, I voted NO on the GENIUS Act because it contained a back door to a central bank digital currency (CBDC). Back then Johnson promised conservatives that he would put Tom Emmer’s bill, that closed the loophole to CBDC, in the NDAA to get our vote on Trump’s bill, the… https://t.co/EHvpwgE9v8 — Former Rep. Marjorie Taylor Greene🇺🇸 (@RepMTG) December 9, 2025 The group also believes that changing the flaw in the legislation could impact local banks’ ability to lend money and provide loans to their users. The Bank Policy Institute stated in August that the result will be greater deposit flight risk, especially in times of stress. The firm noted that a reduction in credit supply at banks could lead to higher interest rates, fewer loans, and increased costs for businesses. The community of bankers acknowledged that the stablecoin legislation was not perfect from a community bank perspective, but a valid effort to bring regulation into the stablecoin market. However, the council believes that the bill’s restrictions on interest payments limit the new payment market from competing with bank deposits and also disrupts community-based lending in the industry. ABA…
Filed under: News - @ January 7, 2026 6:24 am