US Banks Demand Stablecoin Yield Ban While Paying Depositors Nearly Nothing

Banks in the United States are lobbying to change new stablecoin regulations under the GENIUS Act, fearing massive deposit outflows as crypto exchanges gain a competitive advantage in offering yield to customers.

The legislation, which passed in July, prohibits stablecoin issuers, which could include banks, from paying interest directly to customers. However, crypto exchanges that hold stablecoins, such as USDT and USDC, can offer yields and rewards on them.

Banking lobbies, such as the American Bankers Association, warned that this creates a “loophole.” At the same time, banks, which traditionally offer much lower interest rates, fear it creates an “uneven playing field,” according to the Financial Times.

Deposit Outflow to Stablecoins

The banking industry representatives, citing an April Treasury report, claimed that stablecoins could drain $6.6 trillion in bank deposits.

They warned of “greater deposit flight risk, especially in times of stress, that will undermine credit creation throughout the economy,” which could result in “higher interest rates, fewer loans and increased costs for Main Street businesses and households.”

Over the weekend, Politico reported that the financial world is “barreling toward a lobbying civil war in Washington.”

The bankers and lobbyists, who generally see crypto as a threat to their businesses, want to block all crypto companies from paying yield to customers who hold stablecoins, it stated. They also want to repeal a section of the law that they say “allows state-chartered uninsured depository institutions to operate nationwide without proper supervision.”

The banks “want to keep it for themselves,” which is “absolutely outrageous rent-seeking,” said crypto investor Ryan Sean Adams.

“Stablecoin yield belongs to the people, not the banks.”

Meanwhile, Bitwise CIO Matt Hougan saw the funny side, observing the paltry interest rates that leading banks are offering.

I think JPMorgan Chase is confused. Can someone tell them that the 0% interest rule is only for stablecoins, not bank accounts? https://t.co/cXIuWJJMeb pic.twitter.com/oj8b1zC3cC

— Matt Hougan (@Matt_Hougan) August 25, 2025

Crypto Industry Fights Back

Former commissioner of the Commodity Futures Trading Commission and current Blockchain Association CEO, Summer Mersinger, pointed out on Monday that the GENIUS Act is “settled law.”

“There was robust debate on the Hill, and the way this bill came out was a compromise from policymakers,”

“This was no loophole and you know it,” Coinbase chief legal officer Paul Grewal wrote on X in response to the bankers’ statement.

Meanwhile, the Crypto Council for Innovation wrote that banks were seeking to create an “uncompetitive payment stablecoin environment, protecting banks at the expense of broader industry growth, competition, and consumer choice.”

Bowing to banks’ demands would “tilt the playing field in favour of legacy institutions, particularly larger banks, that routinely fail to deliver competitive returns and deprive consumers of meaningful choice,” the associations added.

Former Paxos consultant Austin Campbell said banks were trying to “cripple stablecoins” so that they could continue to,

“Pay you 0% on deposits while making risky loans to commercial real estate billionaires, paying themselves huge bonuses if it works and sticking you with the losses if it doesn’t.”

A timely reminder of why this all is important as banks begin lobbying to cripple stablecoins so that they can continue to:

1 – Pay you 0% on deposits while making risky loans to commercial real estate billionaires, paying themselves huge bonuses if it works and sticking you… https://t.co/atV5Jw5d4I

— Austin Campbell (@CampbellJAustin) August 25, 2025