Several policymakers raised concerns with media outlets in recent days about a loophole in the Genius Act that allows stablecoin issuers to avoid its prohibition on paying interest.
The Genius Act bans payment stablecoin issuers from paying interest or yield on payment stablecoins, but the restriction can be bypassed when exchanges or other affiliates offer yield or rewards to stablecoin holders. The American Bankers Association has called on lawmakers to strengthen the law by expanding the prohibition to cover digital asset exchanges, brokers, dealers and affiliated entities.
Several policymakers have expressed similar concerns. In an interview on the podcast Crypto in America, Federal Reserve Governor Christopher Waller said he views stablecoins as a pure payment instrument.
“It’s not an investment vehicle. It’s not a time deposit where you’re holding it to earn interest,” he said.
Sen. John Kennedy (R-La.) told Punchbowl News that bankers’ concerns about the loophole should be taken seriously. Sen. Mike Rounds (R-S.D.) told Politico Pro that the intent of the legislation was to ban yield payments to stablecoin holders.
“This looks to me like it’s an end-run on the original legislation,” Rounds said. “So I’ve got concerns with that.”
