Crypto Groups Sound Alarm: Bank Proposals Threaten to Stifle Critical Innovation
Brace for impact—traditional finance is mounting its latest offensive against crypto's disruptive momentum.
Banking's Regulatory Onslaught
New proposals from major banking institutions could slam the brakes on blockchain development, crypto advocacy groups warn. These measures—framed as 'consumer protection'—risk creating compliance hurdles so steep they’d make even decentralized protocols groan.
Innovation in the Crosshairs
Instead of fostering collaboration, the banking sector’s playbook seems straight out of the 'if you can’t beat ’em, regulate ’em' handbook. It’s the same old story: legacy players clinging to outdated models while throwing sand in the gears of progress.
Finance’s Favorite Pastime: Protectionism
Nothing gets bankers rallying like a good old-fashioned innovation crackdown—after all, why adapt to the future when you can just try to regulate it out of existence?
Banks warn GENIUS Act loophole could divert $6.6 trillion from traditional lending
As previously reported by Cryptopolitan, several banking institutions, including the Bank Policy Institute (BPI), have petitioned Congress to amend the GENIUS Act, warning that an existing loophole risks constraining credit for U.S. consumers and businesses.
The banking groups have explained that although the GENIUS Act blocks issuers from offering yields, it fails to impose the same restriction on exchanges or affiliates. Thus, they believe some issuers can exploit this loophole and channel yields through exchanges. They even cautioned that the rule gap may result in deposit outflows of up to $6.6 trillion from the conventional banking system.
The banks also cited their worries that the yield-bearing stablecoins could displace deposits, threatening the Core mechanism by which banks fund loans through interest-driven savings accounts.
They also explained that stablecoins are “fundamentally different” from bank deposits since they do not fund lending activities or invest in securities to produce yields; therefore, a systemic shift toward them could create vulnerabilities in the U.S. credit system.
Ethena’s sUSDe has the most payouts with $30.71 million in the last 30 days
Market data illustrates the scale of yield-bearing stablecoins. Analysts like Will Beeson, a former Standard Chartered executive and now founder and CEO of Uniform Labs, believe the GENIUS Act’s restrictions on yield-bearing stablecoins will expedite the FLOW of capital into tokenized real-world assets (RWAs).
To date, yield-bearing stablecoins have paid out more than $800 million in returns to holders, according to a StableWatch report. Additionally, over the past 30 days, Ethena’s sUSDe dominated payouts with $30.71 million, while Securitize’s BUIDL delivered $8.39 million and Sky Ecosystem’s sUSDe $6.78 million. The stablecoin market’s $288 billion valuation remains just a sliver of the Fed-reported $22 trillion U.S. money supply.
Meanwhile, major financial industry groups are urging global banking regulators to abandon proposed new rules for cryptocurrencies and, in a letter, warn that the measures could end up blocking banks from the $2.8 trillion digital asset market.
On Tuesday, eight influential trade associations, including the Global Financial Markets Association and the Institute of International Finance, wrote to the Basel Committee on Banking Supervision to request a “temporary pause” on the rollout of standards related to crypto that were supposed to take effect in January 2026.
The coalition warned that the “punitive capital treatments” in the rules would make crypto operations “uneconomical” for banks, which could force the sector to the fringes of the regulated financial system.
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