Major US banking associations, led by the Bank Policy Institute (BPI), are calling on regulators to address an alleged loophole in the proposed GENIUS Act that could allow stablecoin issuers and their partners to distribute returns indirectly.
In a letter to Congress, the BPI warned that if the rules are not clarified, it could destabilize credit markets, with the risk of up to $6.6 trillion in deposits leaving traditional banks.
Although the GENIUS Act prohibits issuers from paying returns directly, it does not restrict crypto exchange platforms or affiliated entities, which could allow issuers to circumvent the restrictions by partnering with third parties.
Stablecoin providers often use yield offerings to attract users.