$6.6T at Stake: Banks, Crypto Clash Over Stablecoin Regulation

* Banking sector warns of potential $6.6 trillion deposit exodus to stablecoins. * Crypto groups argue regulations stifle innovation and protect banks. A conflict between cryptocurrency advocacy groups and the traditional banking industry over stablecoin regulations is intensifying. The debate centers on the recently enacted "Guiding and Establishing National Innovation for U.S. Stablecoins Act" (GENIUS Act). On August 20, 2025, reports from Cryptopolitan, Cointelegraph, and TradingView News indicated that this act has become a focal point for regulating digital assets in the United States. On the banking side, groups like the American Bankers Association and Bank Policy Institute have flagged a critical loophole in the legislation. The GENIUS Act prohibits stablecoin issuers from directly offering interest or yield; however, it allows exchanges or affiliated third parties to provide such returns. Banks argue this creates an incentive for depositors to withdraw funds from traditional banking accounts and move them into yield-bearing stablecoins, a shift they claim could disrupt the central funding mechanism of traditional banking, which relies on customer deposits to support lending activities. The banking sector estimates that up to $6.6 trillion could migrate out of banks into stablecoins if this trend continues unchecked. Crypto advocacy groups, including the Crypto Council for Innovation and the Blockchain Association, dispute the banks’ claims. In a formal letter to the Senate Banking Committee, these organizations argued the banking industry’s concerns are attempts to shield its market position and suppress innovation. They emphasized that stablecoins differ fundamentally from bank deposits because issuers do not use stablecoins to finance loans. Furthermore, they defended a provision in the GENIUS Act under Section 16(d). This rule allows state-chartered stablecoin issuers to operate across state lines without requiring additional licenses. Proponents argue this measure prevents a fragmented regulatory regime and fosters nationwide innovation. To counter the banking industry's concerns, crypto groups cited a July 2025 analysis by Charles River Associates, which reportedly found no significant correlation between stablecoin market growth and deposit outflows from banks. In addition, advocates highlighted data showing the stablecoin industry can generate substantial returns for investors. To date, yield-bearing stablecoins have paid over $800 million to holders. Ethena's sUSDe stablecoin alone distributed $30.71 million in payouts over the past 30 days, serving as a testament to the growing interest in this asset class. Despite these returns, the total market capitalization of stablecoins remains relatively small at $288 billion compared to the $22 trillion U.S. money supply. This debate is part of a broader effort by the financial industry to resist stricter crypto regulations. On a global scale, eight major trade associations recently urged the Basel Committee on Banking Supervision to delay new cryptocurrency standards set to take effect in January 2026. These groups argue the proposed “punitive capital treatments” would make crypto operations uneconomical for banks and could drive the sector into unregulated areas. According to the latest market data from August 20 at 21:09 UTC, Ethena USDe (USDe) is trading at $1.001, and its 24-hour trading volume has increased by 0.017%. Despite minor fluctuations, the stablecoin remains a key player in the evolving financial landscape.