Crypto Advocates Push Back Against Bank Lobby’s Attempt to Rewrite GENIUS Act

Two industry-leading crypto advocacy groups have condemned the Wall Street banks’ attempt to rewrite the GENIUS Act. The banks are asking for further tightening of the stablecoin act in a joint letter sent to the Senate Banking Committee.

The Crypto Council for Innovation (CCI) and the Blockchain Association urged lawmakers to reject recommendations put forward by the American Bankers Association (ABA) and other state banking groups. The letter accused banks of trying to roll back key aspects of the law that had already been settled after months of negotiation.

Crypto Advocate Groups Urge to Keep the GENIUS Act Intact

At the center of the dispute is what banking groups describe as a “yield loophole”. While the GENIUS Act bans stablecoin issuers themselves from offering yield directly to users, it does not explicitly prevent affiliated exchanges or partners from doing so.

Banking advocates, led by the Bank Policy Institute (BPI), argue that this gap could encourage stablecoin firms to offer returns similar to savings accounts indirectly. In a letter to Congress last week, the groups warned this could remove as much as $6.6 trillion from traditional bank deposits, undermining the credit banks provide to households and businesses.

They further argued that yield-bearing stablecoins would have an unfair competitive advantage by attracting customers without being subject to banking regulations.

The CCI and Blockchain Association strongly rejected these claims. “Payment stablecoins are not bank deposits, or money market funds, or investment products, and thus they are not regulated in the same way. Unlike bank deposits, payment stablecoins are not used to fund loans,” the groups wrote.

They accused the banking lobby of attempting to “re-litigate” provisions that were already thoroughly debated during the legislative process. Rolling back these clauses, the groups warned, would tilt the regulatory playing field in favor of traditional banks and stifle innovation in digital finance.

A particular breaking point is Section 16(d) of the GENIUS Act, which allows subsidiaries of state-chartered institutions to issue stablecoins across state lines without obtaining additional licenses. Banking companies want this language to be taken out, but supporters of cryptocurrency said that doing so would "re-create the same fragmented, balkanised regulatory regime that stifles interstate commerce."

The crypto groups used a July 2025 study by Charles River Associates to ease worries about deposit outflows. The study found no substantial correlation between the expansion of stablecoins and the reduction of bank deposits.

They also showed that stablecoins only make up a minor part of the total money supply. The total market capitalization of stablecoins currently stands at $288 billion, compared with the $22 trillion U.S. dollar supply reported by the Federal Reserve at the end of June.

Despite regulatory debates, yield-bearing stablecoins are already gaining traction. StableWatch says that holders of stablecoins have already made more than $800 million in returns. In the last 30 days, Ethena Staked USDe (sUSDe) paid out the most, with $30.71 million. Securitize's BUIDL came in second with $8.39 million, and Sky Ecosystem's sUSDe came in third with $6.78 million.

The argument shows how Wall Street banks and the crypto sector need to find a common ground as stablecoins go from being niche digital assets to being used by everyone. Because politicians are now under pressure from different sides, the outcome of this argument could affect how stablecoins compete with banks in the larger U.S. financial system.