The American Bankers Association and 52 state bankers associations today urged the Treasury Department to uphold the Genius Act’s prohibition on stablecoin issuers paying interest or yield on payment stablecoins.
The Treasury Department in September issued an advance notice of proposed rulemaking seeking public input on how it should implement the Genius Act, which creates a regulatory framework for payment stablecoins. It also created the prohibition on interest that, in a joint letter, the associations called “a critical provision intended to support stablecoins’ use as a means of payment rather than a store of value.”
“When stablecoin issuers or other market participants offer returns, they disrupt the traditional banking model by drawing deposits away from banks and into digital assets,” the associations said. “This disintermediation reduces funds available for lending and disproportionately harms community banks, which lack the scale to compete with large, tech-affiliated issuers.”
To ensure the prohibition is effective, the associations recommended that the Treasury Department and regulators:
- Define “interest or yield” broadly so that any economic benefit provided to a stablecoin holder should count regardless of what it is called or marketed.
- Prevent evasion of the law through affiliates, partners or other arrangements.
- Do not allow issuers to claim that a benefit is not “solely” for holding, use, or retention of a payment stablecoin just because they add a minor extra condition. “If holding the coin is required to get the benefit, that should be enough to trigger the prohibition,” they said.
