US Bank Groups Urge Closure of “Genius Acts” Stablecoin Yield Loophole

American banking associations are lobbying regulators to eliminate what they perceive as a loophole allowing crypto firms to offer deposit-like yield products without facing the same regulatory scrutiny as traditional banks. The core of the issue lies in the interpretation of federal law, specifically the “Genius Acts,” which prohibit non-banking entities from engaging in unregulated banking activities. Banking groups contend that certain cryptocurrency platforms are exploiting this law by providing products that generate returns on stablecoins, closely resembling traditional savings accounts, yet lacking the capital and insurance requirements imposed on banks. These groups assert that this creates an uneven playing field and increases risks for consumers. Conversely, proponents of cryptocurrencies argue that these products offer innovative investment avenues and can benefit consumers. Nevertheless, the matter remains contentious and is subject to extensive discussions among regulators and the financial services industry.