Alabama Senator Warns GENIUS Act Could Trigger Deposit Flight from Rural Banks to Crypto Platforms

Alabama State Senator Keith Kelley has raised concerns that the GENIUS Act, signed into law on July 18, 2025, may inadvertently destabilize small community banks by encouraging deposit outflows to cryptocurrency platforms. In an op-ed for 1819 News, Kelley argued that loopholes in the legislation could allow crypto firms to offer yield-bearing products that compete with traditional bank deposits.

The core issue hinges on regulatory interpretation. If stablecoin issuers—including foreign or nonbank entities—receive lenient oversight under the "comparable supervision" clause, consumers may flock to higher-yielding crypto alternatives. Banking groups estimate potential deposit losses could reach $6.6 trillion under broad enforcement, threatening rural lenders' ability to finance local businesses and agriculture.

With the U.S. Treasury now soliciting public input ahead of rulemaking, the debate highlights growing tensions between innovation and financial stability. "When yield chasers bypass Main Street for algorithmic returns, entire communities lose," Kelley wrote, framing the issue as a test of regulatory balance.