US Banking Associations Flag Risks in New Stablecoin Legislation

Banking associations representing all 50 states have urged the Senate Banking Committee to amend the recently passed GENIUS Act, the first stablecoin legislation in the US. The groups warn of potential vulnerabilities that could destabilize the financial system if left unaddressed.

The associations emphasize the need for a robust regulatory framework for digital assets, arguing that current loopholes—particularly around yield-bearing stablecoin products—could distort markets and undermine traditional banking. Their letter highlights how exchanges or affiliates might circumvent the law’s prohibition on interest payments by offering rewards to stablecoin holders.

This pushback underscores the tension between innovation and systemic risk as stablecoins gain traction. The outcome could shape credit markets and the broader adoption of crypto-native financial instruments.