{"id":41999,"date":"2025-08-13T15:17:03","date_gmt":"2025-08-13T15:17:03","guid":{"rendered":"https:\/\/dogewisperer.com\/?p=41999"},"modified":"2025-08-13T15:17:03","modified_gmt":"2025-08-13T15:17:03","slug":"us-banking-groups-petition-congress-to-shut-down-stablecoin-yield-workaround","status":"publish","type":"post","link":"https:\/\/dogewisperer.com\/?p=41999","title":{"rendered":"US Banking Groups Petition Congress To Shut Down Stablecoin Yield Workaround"},"content":{"rendered":"<div>\n<p>Several major banking groups in the US have made a concerted effort to reach out to Congress regarding wording in the GENIUS Act that has created a stablecoin yield loophole.<\/p>\n<p>The Bank Policy Institute (BPI) stated in a <a class=\"general-link\" href=\"https:\/\/bpi.com\/wp-content\/uploads\/2025\/08\/Closing-the-Payment-of-Interest-Loophole-for-Stablecoins_08.12.2025.pdf\" target=\"_blank\" rel=\"noopener nofollow\">letter <\/a>sent on 12 August 2025 to Congress that the existing language of the law allows stablecoin issuers to route yield through third-party exchanges or intermediaries.<\/p>\n<p>The GENIUS Act, <a class=\"general-link\" href=\"https:\/\/99bitcoins.com\/news\/adoption\/jpmorgan-explores-crypto-loans-after-genius-act\/\" target=\"_blank\" rel=\"nofollow noopener sponsored\">enacted <\/a>on 18 July 2025 under the administration of President Trump, prohibits stablecoin issuers from directly offering interest or yield to token holders.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\">The fight between banks and stablecoin issuers is getting very interesting.<\/p>\n<p>US banking groups think yield-bearing stablecoins will trigger $6.6 trillion outflows from the legacy banking system.<\/p>\n<p>And this will &#8220;undermine credit creation,&#8221; leading to &#8220;higher interest rates, fewer\u2026 <a href=\"https:\/\/t.co\/3LsuhDE91x\" rel=\"nofollow\" target=\"_blank\">https:\/\/t.co\/3LsuhDE91x<\/a><\/p>\n<p>\u2014 Sayan (@Sayan_Web3) <a href=\"https:\/\/twitter.com\/Sayan_Web3\/status\/1955567375039824122?ref_src=twsrc%5Etfw\" rel=\"nofollow\" target=\"_blank\">August 13, 2025<\/a><\/p>\n<\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>However, the legislation does not explicitly ban affiliated entities from doing the same on behalf of the issuers. This has raised concerns among major US banking associations, which put forward the notion that this loophole could be exploited to circumvent the spirit of the law.<\/p>\n<p>Furthermore, the group has warned that allowing affiliated entities to offer yield on stablecoins could destabilise the US financial system and cited a US Treasury projection estimating that such practices might result in $6.6 trillion in deposit outflows from traditional banks.<\/p>\n<p><strong>EXPLORE:\u00a0<a class=\"general-link\" href=\"https:\/\/99bitcoins.com\/cryptocurrency\/next-1000x-crypto\/\" target=\"_blank\" rel=\"nofollow noopener sponsored\">10+ Crypto Tokens That Can Hit 1000x in 2025<\/a><\/strong><\/p>\n<h2><strong>Large-Scale Shift To Stablecoins Could Drive Up Borrowing Costs <\/strong><\/h2>\n<p>Banks have traditionally relied on deposits to fund their loans. However, they now run the risk of users parking their funds in yield-bearing stablecoins that could siphon those deposits away, potentially driving up borrowing costs for families and businesses alike.<\/p>\n<p>In their letter to Congress, the banking groups have put their foot down and demanded that payment stablecoins should not offer interest in a manner indistinguishable from banks or money market funds that operate under strict regulatory oversight.<\/p>\n<p>Unlike traditional financial (TradFi) institutions, stablecoin issuers do not lend or invest in securities to generate returns, fundamentally differing from TradFi bodies in their yield mechanism.<\/p>\n<p>Still, the issue remains. Yield is one of the main drivers of stablecoin adoption. Stablecoin issuers have historically avoided paying interest directly. However, users can still earn returns via affiliated platforms.<\/p>\n<p>Case in point, holding USDC on exchanges like Coinbase or Kraken can generate yield, positioning stablecoins as an enticing alternative to traditional savings accounts.<\/p>\n<p>Banking groups argue that this dynamic introduces the risk of deposit flight, especially during periods of economic stress. As funds shift away from TradFi bodies, the resulting contraction in credit supply could result in higher interest rates, fewer loans and an increased cost of borrowing for everyday users.<\/p>\n<p><strong>EXPLORE:\u00a0<a class=\"general-link\" href=\"https:\/\/99bitcoins.com\/cryptocurrency\/new-cryptocurrency\/\" target=\"_blank\" rel=\"nofollow noopener sponsored\">Best New Cryptocurrencies to Invest in 2025<\/a><\/strong><\/p>\n<h2><strong>Coinbase And PayPal Still Offering Stablecoin Yield<\/strong><\/h2>\n<p>While the stablecoin market is still modest compared to the $22 trillion US money supply, the US Treasury projects that it could balloon up to $2 trillion by 2028.<\/p>\n<p>Currently, the global stablecoin market, valued at $280.2 billion, is dominated by Tether\u2019s USDT and Circle\u2019s USDC, accounting for over 80% of the <a class=\"general-link\" href=\"https:\/\/www.coingecko.com\/en\/categories\/stablecoins\" target=\"_blank\" rel=\"noopener nofollow\">total valuation<\/a>, with Tether holding $165 billion and USDC holding $66.4 billion in circulation.<\/p>\n<p>Meanwhile, in the backdrop of the banking groups petitioning Congress, Coinbase and PayPal, two of the largest US-based crypto firms, are progressing full steam ahead with their respective <a class=\"general-link\" href=\"https:\/\/cryptonews.com\/news\/coinbase-and-paypal-exploit-legal-gray-zone-to-offer-stablecoin-yields-despite-federal-ban\/\" target=\"_blank\" rel=\"noopener nofollow\">stablecoin reward programs<\/a>.<\/p>\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\">\n<p lang=\"en\" dir=\"ltr\"><img decoding=\"async\" src=\"https:\/\/s.w.org\/images\/core\/emoji\/16.0.1\/72x72\/1f3e6.png\" alt=\"\ud83c\udfe6\" class=\"wp-smiley\" style=\"height: 1em; max-height: 1em;\"> Coinbase &amp; PayPal found the GENIUS Act loophole! Both offering stablecoin &#8220;rewards&#8221; despite yield ban \u2013 Coinbase 4.1% on USDC, PayPal 3.7% on PYUSD.<\/p>\n<p> Their defense: &#8220;We&#8217;re not issuers, we pay rewards not interest.&#8221; Critics say it weakens the law&#8217;s intent to separate\u2026<\/p>\n<p>\u2014 Dr Efi Pylarinou (@efipm) <a href=\"https:\/\/twitter.com\/efipm\/status\/1954566093814554686?ref_src=twsrc%5Etfw\" rel=\"nofollow\" target=\"_blank\">August 10, 2025<\/a><\/p>\n<\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Executives from both companies have stated in their earnings calls that they plan to continue rewarding users who hold stablecoins on their platforms, with Coinbase CEO Brian Armstrong stating, \u201cWe are not the issuer. We don\u2019t pay interest or yield\u2014we pay rewards.\u201d<\/p>\n<p><strong>EXPLORE:\u00a0<a class=\"general-link\" href=\"https:\/\/99bitcoins.com\/cryptocurrency\/high-risk-high-reward-crypto\/\" target=\"_blank\" rel=\"nofollow noopener sponsored\">9+ Best High-Risk, High-Reward Crypto to Buy in August 2025<\/a><\/strong><\/p>\n<div class=\"nnbtc-key-takeaways\">\n<h2 class=\"nnbtc-key-takeaways__title\">Key Takeaways<\/h2>\n<ul class=\"nnbtc-key-takeaways__list\">\n<li class=\"nnbtc-key-takeaways__list-item\">\n        TradFi bodies have petitioned Congress to resolve wording in the GENIUS Act, resulting in a stablecoin yield loophole    <\/li>\n<li class=\"nnbtc-key-takeaways__list-item\">\n        Platforms such as Coinbase and Kraken give back rewards, prompting users to park their funds on their platforms rather than traditional deposits in a bank    <\/li>\n<li class=\"nnbtc-key-takeaways__list-item\">\n        The stablecoin market could balloon up to $2trillion by 2028, underscoring its growing influence on global liquidity and financial infrastructure    <\/li>\n<\/ul><\/div>\n<p>The post <a href=\"https:\/\/99bitcoins.com\/news\/altcoins\/us-banking-groups-petition-congress-to-shut-down-stablecoin-yield-workaround\/\">US Banking Groups Petition Congress To Shut Down Stablecoin Yield Workaround<\/a> appeared first on <a href=\"https:\/\/99bitcoins.com\/\">99Bitcoins<\/a>.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Several major banking groups in the US have made a concerted effort to reach out to Congress regarding wording in the GENIUS Act that has created a stablecoin yield loophole. The Bank Policy Institute (BPI) stated in a letter sent on 12 August 2025 to Congress that the existing language of the law allows stablecoin [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"iawp_total_views":0,"footnotes":""},"categories":[2],"tags":[3,4,5],"class_list":["post-41999","post","type-post","status-publish","format-standard","hentry","category-news","tag-crypto","tag-doge","tag-news"],"_links":{"self":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/41999","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=41999"}],"version-history":[{"count":0,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=\/wp\/v2\/posts\/41999\/revisions"}],"wp:attachment":[{"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=41999"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=41999"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dogewisperer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=41999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}