Establishing a robust regulatory framework for stablecoin that integrates with, rather than disintermediates, the banking industry is critical to ensure financial stability and the ongoing vibrancy of the U.S. economy, American Bankers Association SVP for Innovation and Strategy Brooke Ybarra writes in a new opinion column for American Banker.
The GENIUS Act in the Senate would establish a regulatory framework for payment stablecoin. Ybarra writes that whatever framework is adopted, “it should not interrupt the flywheel for credit creation by incentivizing value to be held in the form of payment stablecoin rather than bank deposits.” One means of accomplishing this would be to prohibit the use of financial inducements on payment stablecoin, such as PayPal recently proposed by offering a 3.7% reward on balances held in PayPal and Venmo wallets.
Another solution is to require that some stablecoin reserves be held at U.S. banks, Ybarra writes. “Bank deposits must be a practical option for payment stablecoin reserves, and regulators must allow all banks to accept these reserves as deposits.”
“If Congress puts in place these reasonable guardrails, then it’s safe to assume that banks will participate in the stablecoin marketplace, and Americans will be able to safely enjoy the potential benefits,” Ybarra writes. “But until that regulatory perimeter is established, banks should tread carefully — and so should everyone else, for the sake of our banking system and the broader economy.”
