Introduction
On August 19, 2025, leading industry organizations representing stablecoin issuers submitted a letter to Senate Banking Committee leadership, opposing efforts by bank trade associations to amend the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) before implementation. The letter highlighted concerns that proposed amendments would grant traditional banks an undue advantage and restrict consumer choice.
Proposed Amendments
Banking groups including the American Bankers Association and the Bank Policy Institute lobbied for the removal of Section 16(d), which permits state-chartered institution affiliates to conduct money transmission across state lines in support of stablecoin operations, and for a prohibition on yield programs offered by stablecoin issuers or their affiliates. Arguments presented by these associations cited potential regulatory arbitrage, the risk of deposit drain from community banks and exemptions for affiliates as threats to financial stability.
Industry Response
The Crypto Council for Innovation and the Blockchain Association countered that stablecoin reserves held in commercial banks and U.S. Treasury securities continue to support systemic liquidity, and that yield-sharing arrangements promote competition and benefit underbanked consumers. Citing a July 2025 Charles River Associates study, the letter emphasized the absence of a statistically significant correlation between stablecoin adoption and community bank deposit declines, challenging assertions of systemic risk.
Legislative Context
The GENIUS Act became law on July 18, 2025, establishing a federal framework for payment stablecoin issuance, audits and reserve requirements. Concurrently, the Digital Asset Market Clarity Act, which passed the House and awaits Senate approval, could influence final stablecoin regulations. Lawmakers face the task of reconciling both bills and drafting implementing rules under a 180-day timeline. Observers note that any modifications during conference negotiations may reshape the stablecoin ecosystem prior to operational guidelines issuance.
Potential Impact
Removal of Section 16(d) could restrict state-chartered depository activities for stablecoin entities, requiring separate money transmission licenses and complicating nationwide redemption processes. Prohibiting yield programs for stablecoin holders while allowing interest-bearing deposit accounts in legacy banks could shift consumer activity away from digital assets. The industry letter argued that preserving these features ensures fair competition and supports financial inclusion goals outlined in the original legislative intent.
Conclusion
As Senate banking leaders prepare for markup sessions in September, stablecoin issuers and banking representatives are expected to intensify lobbying efforts. The outcome of this legislative process will determine the operational landscape for stablecoin markets in the United States and influence competitive dynamics between digital asset firms and traditional financial institutions.
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