Banks argue GENIUS Act bans all stablecoin rewards
US banking associations contend that the GENIUS Act effectively prohibits any form of interest or reward payments on stablecoins. They argue this measure creates a total ban that affects how issuers and exchanges incentivize users.
Impact on exchanges and stablecoin issuers
Crypto exchanges like Coinbase currently offer returns on stablecoin holdings that far exceed traditional deposit rates, intensifying competition with banks. A broad reading of the Act would halt such practices, aligning stablecoin incentives with banking regulations.
Regulatory interpretation and PayPal’s case
A narrower interpretation might allow PayPal to maintain rewards on its own stablecoin, as technically it is not the issuer. The Act prohibits stablecoin issuers from offering any form of yield tied to usage or balances to safeguard banking deposits vital for credit markets.
Industry response and Treasury consultation
The coalition of banking associations, referred to as “joint trades,” submitted detailed feedback to the US Treasury as it develops implementing regulations. While Coinbase urged regulators to maintain the Act “as written,” the banks’ interpretation suggests this wording still supports a comprehensive ban.
“The joint trades argue that both the statutory language and the legislation’s objectives support a broad interpretation of the interest ban.”
Regulatory clarity ahead
The GENIUS Act’s high-level structure requires further guidance from Treasury to clarify scope and application. These upcoming regulations will determine whether current stablecoin rewards programs can continue under the law.
Author’s summary: US banks insist the GENIUS Act broadly forbids stablecoin interest to shield traditional deposits, challenging crypto platforms’ current reward systems.