A coalition of major US banking associations, led by the Bank Policy Institute (BPI), is urging lawmakers to amend new stablecoin legislation to prevent issuers and their affiliates from indirectly offering interest or yield on stablecoins.
In a letter sent to Congress on Tuesday, the groups warned that a gap in the recently enacted GENIUS Act could allow issuers to sidestep the law’s prohibition on yield payments by partnering with crypto exchanges or related entities. The BPI, joined by the American Bankers Association, Consumer Bankers Association, Independent Community Bankers of America, and the Financial Services Forum, said such arrangements could destabilize the US banking system.
In digital asset market structure legislation, it is important that the requirements in the GENIUS Act prohibiting the payment of interest and yield on stablecoins are not evaded.
The latest from BPI, @ABABankers, @ConsumerBankers, @FSForum and @ICBA: https://t.co/YOta4d4UDA
— Bank Policy Institute (@bankpolicy) August 12, 2025
According to the letter, widespread adoption of yield-bearing stablecoins could trigger up to $6.6 trillion in deposit outflows from traditional banks — a shift that, they argue, would restrict the flow of credit to American households and businesses. Citing an April US Treasury report, the groups warned that such a migration of funds could lead to higher borrowing costs, fewer loans, and increased financial strain on Main Street.
BPI noted stablecoins are fundamentally different from bank deposits and money market funds because they don’t fund loans or invest in securities to offer yield.
“These distinctions are why payment stablecoins should not pay interest the way highly regulated and supervised banks do on deposits or offer yield as money market funds do.”
The letter stated.
Stablecoins — digital tokens pegged to fiat currencies — currently have a combined market value of about $280.2 billion, according to CoinGecko, with Tether (USDT) and USD Coin (USDC) accounting for more than 80% of that total. While this is a fraction of the $22 trillion US dollar money supply, the Treasury projects the market could swell to $2 trillion by 2028.
The GENIUS Act, signed into law by President Donald Trump on July 18, aims to strengthen the US dollar’s global standing by promoting dollar-pegged stablecoins. However, banking groups insist that unless the yield prohibition is explicitly extended to all intermediaries, the law will leave a critical regulatory gap.
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