The crypto industry is mounting a counteroffensive against Wall Street bankers’ bid to rewrite the U.S.’ new stablecoin law, arguing that attempts to roll back core provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act would tilt the field toward traditional banks.
In a letter to Senate Banking Committee leaders dated Aug. 19, the Crypto Council for Innovation and the Blockchain Association urged lawmakers to reject proposals from the American Bankers Association, Bank Policy Institute and state banking groups that called for stripping out Section 16(d) of the law and banning yield programs offered by affiliates of stablecoin issuers.
Section 16(d) allows subsidiaries of state-chartered institutions to conduct money transmission across state lines in support of stablecoin issuer activities, ensuring holders can redeem their tokens nationwide without needing separate state licenses.
Banking groups warned earlier this month that allowing state-chartered, uninsured institutions to issue stablecoins and operate nationwide would amount to regulatory arbitrage, bypassing state licensing regimes, CoinDesk reported earlier.
They also argued that the law contains a loophole by banning issuers themselves from offering interest but not preventing affiliates or exchanges from doing so, which they say could drain as much as $6.6 trillion in deposits from the U.S. banking system.
The crypto groups’ Aug. 19 letter dismissed those fears as unsupported by observed data. Citing a July 2025 study by Charles River Associates, the groups said there is no statistically significant link between stablecoin adoption and community bank deposit outflows.
Instead, they pointed out, most stablecoin reserves remain inside the financial system in commercial banks and Treasury securities, continuing to support lending.
They also argued that allowing affiliates to share rewards with stablecoin users ensures fair competition, especially for underbanked consumers who are underserved by traditional banks.
At present, the average U.S. checking account pays just 0.07% APY, far below inflation, while the Federal Reserve’s benchmark interest rate stands at 4.25%-4.50%.
“Eliminating these features for stablecoin users, while allowing them in the banking sector, would tilt the playing field in favor of legacy institutions,” the groups wrote.
The GENIUS Act is law, but the Digital Asset Market Clarity Act, a broader crypto markets framework already passed by the House and currently in the Senate, could still reshape stablecoin policy before regulators draft implementing rules.
Bankers have seized on that process to push their agenda, while crypto groups are lobbying to keep the law intact.
Republican Tim Scott of South Carolina, the Senate Banking chairman, said this week he expects the bill to be finalized by the end of September and believes as many as 18 Democrats may vote for it. However, he acknowledged the possibility of resistance from Sen. Elizabeth Warren, a Democrat from Massachusetts, and her allies.
Whatever version emerges will need to be reconciled with the House’s Digital Asset Market Clarity Act and could provide the opening bankers want to revise stablecoin provisions before regulators begin writing rules.
