Bank Lobbying Threatens Crypto Rewards to Protect Interests

Banks are pressing U.S. lawmakers to limit crypto rewards, arguing these threaten deposits and violate the GENIUS Act’s interest ban on stablecoins.

The lobbying intensifies scrutiny on future stablecoin regulations, posing potential challenges to the evolving landscape of digital financial products and the banking sector’s traditional revenue streams.

Banks and trade groups are lobbying the U.S. Congress to ban crypto rewards, citing risks to bank deposits.

This move could reshape banking and crypto exchange relationships, impacting consumer access to higher-yield products.

Banks Push to Limit Crypto Rewards on Stablecoins

The American Bankers Association (ABA) and Independent Community Bankers of America (ICBA) are leading lobbying efforts against crypto rewards on stablecoins. They argue such rewards bypass the GENIUS Act’s interest ban.

Banking groups claim rewards could harm traditional bank deposit structures. Crypto firms view this as protecting banks’ profits at consumer cost. The U.S. Treasury is considering regulatory definitions.

Consumer Access to Digital Dollars at Risk

This initiative could limit consumer access to higher-yield digital dollars while safeguarding banks’ income from Fed reserves. The banking sector is concerned about potential deposit loss.

Financial and political implications include protecting banks’ competitive edge while consumers may face reduced interest options on stablecoin holdings if rewards are banned.

GENIUS Act and Its Impact on DeFi Platforms

The GENIUS Act already restricts interest on stablecoins, a compromise to protect bank deposits while permitting payment stablecoins. The current lobbying is a continuation of this regulatory struggle.

Historically, policy actions against interest-bearing products have impacted DeFi platforms. A ban on stablecoin rewards could further constrain consumer and market innovation in the crypto sector. Rob Nichols, President & CEO, American Bankers Association (ABA), stated, “Crypto firms are seeking to exploit a loophole in the GENIUS Act’s yield ban by offering rewards on stablecoins.” [source: internal policy memo]