Banks Warn Against Investing in Stablecoins

U.S. community banks are asking Congress to tighten stablecoin rules, warning that a legal loophole allows indirect yields.

In a letter to senators, banking groups said the GENIUS Act bans stablecoin interest but allows exchanges to offer rewards instead.

They argue these rewards act like interest and could draw money away from insured bank deposits.

Banks warn that large deposit losses could reduce lending to small businesses, farmers, and home buyers.

Crypto exchanges such as Coinbase and Kraken offer incentives for holding some stablecoins, though not directly from issuers.

Crypto industry groups disagree, saying stablecoins do not fund loans and stricter rules could hurt innovation and digital payments.