Stability Argument Masks a Deeper Fight
A growing policy dispute in Washington is revealing a familiar tension in U.S. finance: competition versus protectionism, framed under the language of financial stability. At the center of the debate is the GENIUS Act, landmark legislation designed to establish a federal framework for payment stablecoins.
While the law was negotiated over months and passed as a compromise, new lobbying efforts from banking interests are now seeking to reopen key provisions—raising concerns about whether legislative certainty is being undermined to protect incumbent market power.
What the GENIUS Act Already Settled
Under the GENIUS Act, stablecoin issuers are prohibited from paying interest directly on tokens, addressing concerns that stablecoins could function as unregulated bank deposits. At the same time, lawmakers allowed platforms and third parties to offer rewards or incentives, preserving room for innovation and competition in payments.
That balance was intentional. It reflected an agreement between regulators, lawmakers, and industry participants that sought to manage risk without freezing out new entrants.
Banks Push Back After Passage
Despite that compromise, banking lobby groups are now urging Congress to tighten the rules further, warning of potential threats to “financial stability” and “community bank deposits.” Critics argue these claims lack empirical support, noting that available research shows no clear evidence of disproportionate deposit outflows tied to stablecoin usage.
Opponents counter that the real concern is not systemic risk, but margin pressure. Traditional banks earn interest on reserves held at the Federal Reserve, while retail deposit rates often remain near zero—creating growing scrutiny over who benefits from the current system.
A Signal Beyond Crypto
How lawmakers respond could have consequences far beyond digital assets. If Congress revises settled legislation under post-passage lobbying pressure, it may signal to fintech firms and payments innovators that U.S. policy frameworks are unstable and subject to incumbent influence.
Bottom Line
The GENIUS Act debate is no longer just about stablecoins. It has become a test of whether U.S. financial policy will encourage competition—or quietly preserve existing power structures under the banner of stability.
Disclaimer
This article is for informational purposes only and does not constitute financial or investment advice. This article was created with AI assistance and curated by DNIR Staff for accuracy and editorial standards.
Source: Digital News & Investigative Reports (DNIR) — cnirbc.com
