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A group of U.S. community bankers is urging Congress to amend the GENIUS Act. The aim is to block a loophole that is allowing stablecoin-related yield payments, which could weaken bank deposits. In a letter sent on Monday to the Senate, the American Bankers Association’s Community Bankers Council asked lawmakers to tighten the stablecoin bill passed last year.
The council noted how some stablecoin issuers avoid the law’s yield ban by routing payments through exchanges and other partners rather than directly paying the holders. The GENIUS Act bars stablecoin issuers from offering interest after lawmakers agreed such products could compete with bank savings accounts.
The bankers warned that continued yield practices could shift deposits away from community banks, reducing credit availability in local economies. Would lawmakers step in before stablecoins begin to reshape how Americans save money?
The Community Bankers Council represents more than 200 leaders across the United States who framed the issue as an urgent matter. The group argued that exchange-based rewards tied to stablecoins defeat the purpose of the GENIUS Act’s original restrictions.
Platforms such as Coinbase and Kraken offer rewards for holding certain stablecoins on user services. The council said this structure allows yield to flow indirectly while issuers claim compliance with the law.
It warned that if billions leave community banks, lending to small businesses, farmers, students, and home buyers could decline. At the same time, legislative activity is accelerating on Capitol Hill.
On January 6, Republican Senator John Kennedy noted that the Senate Banking Committee will hold a markup vote next week. It will focus on crypto market structure legislation, including the CLARITY Act. Kennedy, as Banking Committee Chairman, and Tim Scott plans to proceed even without full consensus.
The CLARITY Act seeks to define how the Securities and Exchange Commission and the Commodity Futures Trading Commission oversee crypto markets. It assigns the CFTC with primary authority over spot crypto markets, clarifying when security laws apply.
Still, some unresolved questions remain, including how to treat stablecoins that generate yield. Banking groups argue that interest-paying stablecoins could function like deposits without regulatory safeguards.
They also noted how affiliated firms lack the structure to replace bank lending or offer insured financial products. The council urged lawmakers to ban affiliates and partners of stablecoin issuers from offering yield within market structure legislation. Crypto advocacy groups pushed back against those claims.
The Crypto Council for Innovation and the Blockchain Association sent a letter to the Senate Banking Committee last August. They argued that payment stablecoins do not fund loans, emphasizing how tighter rules could limit innovation and consumer choice. Meanwhile, ethical scrutiny has emerged around cryptocurrency ventures tied to the Trump family.
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These include World Liberty Financial and the Trump memecoin launched after the 2024 campaign. World Liberty Financial allows the Trump family to receive 75% of the net proceeds from token sales.
By December 2025, the family had earned $1 billion while holding $3 billion worth of unsold tokens. The Community Bankers Council letter adds to earlier pressure from the Banking Policy Institute, led by JPMorgan CEO Jamie Dimon. Last August, he had warned unchecked stablecoin yields could trigger massive deposit outflows.
US community banks are pressing Congress to revise the GENIUS Act to block indirect stablecoin yield practices. Lawmakers now face growing pressure as crypto market structure bills advance. The outcome could shape how stablecoins compete with banks and deposits that support local lending across the country.
