Catenaa, Saturday, January 10, 2026-Community bankers are urging Congress to close gaps in a stablecoin law, warning that yield-bearing crypto programs could divert deposits from local banks and harm small businesses and households.
The American Bankers Association’s Community Bankers Council sent a letter this week to the U.S. Senate highlighting risks in the GENIUS bill, passed last summer.
The council said allowing stablecoin issuers to pay interest or rewards could make those assets more attractive than traditional deposits, potentially reducing community bank lending.
“If billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer,” the council wrote.
ABA President Rob Nichols added that the loophole could redirect trillions of dollars away from banks and called for lawmakers to act.
Crypto advocates, including the Blockchain Association, have disputed the claim, saying evidence shows no disproportionate deposit outflows tied to stablecoin adoption.
They argue that restricting yield-bearing stablecoins could hinder competition in payments and financial services and create regulatory uncertainty.
The association noted banks currently hold trillions in reserves at the Federal Reserve, which earn interest without being deployed into loans.
Lawmakers are expected to address the issue as part of broader legislation regulating the cryptocurrency industry.
A group of senators is scheduled to meet on Tuesday to discuss the sweeping crypto market structure bill, which could include provisions clarifying the treatment of yield-generating stablecoins.
