Crypto Firms Unite Against US Banking Lobby on Stablecoin Yields
A heated battle is brewing between cryptocurrency companies and traditional banks over stablecoin yields, with over 125 prominent crypto firms, including Coinbase, Gemini, and Kraken, pushing back against US banking lobbyists. At the heart of this dispute is the prohibition outlined in the GENIUS Act, which prevents stablecoin issuers like Tether from paying out dividends. However, a loophole currently lets crypto exchanges distribute yields to their customers, setting the stage for conflict.
The Banking Lobby’s Argument
Traditional banks are arguing that allowing unregulated cryptocurrency platforms to offer high yields on cash-like stablecoins could lead to financial instability. They claim this practice poses systemic risks to the financial ecosystem. Banks warn that this could trigger up to $6.6 trillion in deposit outflows from the banking system to cryptocurrency platforms, undermining the capital they use to fund mortgages and business loans. This shift may ultimately result in increased borrowing costs and fewer financial offerings for Americans.
Crypto Industry’s Counterpoint
Crypto advocates view the banking sector’s claims as protectionist efforts designed to maintain their hold on low-interest deposits. The coalition has urged lawmakers to resist calls for revisiting the GENIUS Act’s stablecoin-related provisions, stating that reopening the debate would compromise regulatory stability and market predictability.
Tyler Winklevoss, co-founder of Gemini, directly criticized the banking lobby’s maneuvers, framing them as an attempt to undo a settled legislative compromise. The crypto industry emphasizes that stablecoin yield programs empower consumers to benefit from high-interest environments, like the 4% offered in Treasury markets, without the losses incurred from traditional banking’s low-interest frameworks.
The Broader Implications
As crypto continues its rise, this dispute extends beyond stablecoin yields to question whether traditional banks or emerging financial technologies will dominate the future of finance. Lawmakers now face a significant choice: side with innovative platforms that could democratize returns for consumers or maintain traditional financial structures at the risk of stifling technological progress.
A Product to Explore: Coinbase Earn
For those interested in earning with their digital assets, platforms like Coinbase Earn offer the opportunity to earn yields on supported cryptocurrencies, including stablecoins. Learn more about Coinbase Earn here.
