Banks Call for Fixes to Trump’s Stablecoin Law

- Banking associations warn of risks in stablecoin interest payment loopholes. - Concerns over "deposit flight risk" spark calls for legislative amendments. On August 14, 2025, The Block reported widespread concerns from the U.S. banking industry about the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, which President Donald Trump signed into law. 53 banking associations, including the American Bankers Association (ABA), called on Congress to address what they describe as regulatory gaps involving stablecoin interest payments. They claim these gaps could pose significant risks to the broader financial system. The banking groups' primary issue is the act's lack of stringent restrictions on interest payments by stablecoin issuers. They argue that affiliates such as exchanges and brokers could exploit these provisions, transforming stablecoins from a payment mechanism into a store of value and credit instrument. According to the associations, this shift could trigger a "deposit flight risk" as customers move their funds from traditional banks to interest-bearing stablecoins. They warn that this outcome could harm banks’ lending capacity, leading to higher interest rates, reduced loan availability, and greater financial burdens on consumers and businesses, particularly during economic downturns. To mitigate these risks, the banking associations proposed extending the prohibition on interest payments to include affiliates of stablecoin issuers, such as exchanges, brokers, and dealers. They asserted that these revisions are critical to preserving banks’ central role in credit intermediation, ensuring economic stability, and fostering safe innovation in digital payments, and urged lawmakers to integrate these changes into the broader regulatory frameworks for the crypto market now under discussion. However, on August 14, 2025, Paul Grewal, Coinbase's Chief Legal Officer, dismissed these concerns in a post on the social media platform X. Grewal argued that the GENIUS Act contains no loopholes, pointing to the overwhelming bipartisan support it received in Congress as evidence of its soundness. He suggested that the claims made by the banking industry represent a divergence of interests rather than genuine policy flaws.