Who should control the economics of digital money: the banks that dominated the last century, or the platforms building tomorrow's payment systems?
On December 20, 2025, Christian Encila reported on a revealing fault line in U.S. cryptocurrency regulation: the Blockchain Association is leading a coalition against efforts to expand stablecoin yield restrictions beyond what Congress explicitly wrote into the GENIUS Act.
At stake is not just whether users can earn stablecoin rewards. It is a deeper question of who captures value in the emerging world of digital payments and financial services—and how far banking regulations should go in reshaping competition between financial institutions and fintech companies.
The core battle: what did Congress really intend?
The GENIUS Act, signed into law earlier this year by US President Donald Trump, drew a clear line: permitted stablecoin issuers cannot pay interest or yield directly to holders.[5][6]
But that same legislative framework deliberately left space for third-party platforms, such as crypto exchanges and fintech apps, to offer incentives and rewards on top of stablecoins.[5][6] In other words:
- Issuers: barred from paying direct yield
- Platforms and intermediaries: allowed to design lawful rewards at the "application layer" of payment systems[6]
The Blockchain Association, backed by more than 125 digital assets and fintech organizations, is now urging the Senate Banking Committee to resist attempts to reinterpret that compromise and widen the ban to cover those third-party rewards.[5][6]
If regulators or lawmakers change that interpretation after the fact, the coalition argues, they would:
- Reopen a settled law, destabilizing the GENIUS framework
- Undermine regulatory clarity just as agencies begin rulemaking
- Chill innovation in next‑generation digital payments and blockchain technology[5][6]
Why banks are pushing to close the "loophole"
On the other side, a coalition led by the American Bankers Association and state banking groups is pressing Congress to "close a stablecoin interest loophole."[3]
Their message is blunt:
- Stablecoin rewards offered via exchanges and affiliated platforms look like interest-bearing accounts without equivalent safeguards.[3]
- These incentives could shift customer funds out of bank deposits and into digital asset products, threatening the traditional banking industry model of taking deposits and making loans.[3]
- Treasury Department analyses cited by bank advocates warn that, in certain scenarios, stablecoins could pull over $6 trillion from deposits—becoming a central talking point in the banking lobby's case for tightening rules.[3]
From the banks' perspective, this is about:
- Regulatory compliance and parity: they argue that exchanges and other non-banks operate outside the strict prudential rules that govern insured financial institutions.[3]
- Monetary policy transmission: if too much money migrates into non‑bank digital assets, banks say it could impair their role in supporting credit creation and the broader economy.[3]
Their proposed fix: extend the GENIUS prohibition so it clearly includes partners, affiliates, and platforms—not just the core stablecoin issuer.[3]
The industry's counterargument: this is about competition, not safety
The Blockchain Association and its allies see something very different: an attempt to use banking regulations as a competitive moat.[5][6][7]
Their core claims:
- GENIUS already addressed safety risks by focusing on issuer balance sheets and forbidding direct yield, while still allowing innovation at the platform level.[6]
- Stablecoin rewards are functionally similar to long-standing bank and card incentive programs—points, cashback, and bonus offers that have been used for decades in financial services.[5][6]
- There is no robust evidence that regulated stablecoins are draining community bank deposits or limiting lending capacity, with some studies finding no statistically significant link between stablecoin adoption and community bank deposit losses.[6][7]
They warn that expanding the ban would:
- Tilt the playing field toward incumbent financial firms that already dominate payment rails and card networks
- Reduce consumer protection in practice by limiting choice and keeping users in low-yielding bank products, even as interest rates remain materially higher in broader markets
- Signal to innovators that even "settled" cryptocurrency regulation can be quickly reopened under political pressure, weakening confidence in U.S. legislative frameworks for digital assets[5][6][7]
In this telling, the dispute is less about safety and more about who gets to define value in the next generation of payment systems. Organizations need comprehensive compliance frameworks to navigate these evolving regulatory landscapes.
The deeper strategic question: who owns the economics of payments?
Viewed through a business lens, the fight over stablecoin yield restrictions raises several thought‑provoking questions for leaders across cryptocurrency, banking, fintech, and broader financial services:
Are stablecoin rewards the new "interchange"?
For traditional cards, interchange and rewards shaped how payment systems evolved and who captured margin. If regulators remove stablecoin rewards, do they effectively lock in the legacy economics of payments and slow the migration to digital assets?What does "consumer protection" mean in a high‑rate world?
When the central bank keeps interest rates elevated but average checking and savings accounts pay close to zero, is it protective—or punitive—to stop users from accessing yield-bearing digital payments tools tied to market rates?How should regulatory clarity evolve with technology?
The GENIUS Act is young, yet both sides are already lobbying to reinterpret its scope. If every new legislative framework is immediately reopened, can long‑horizon infrastructure—like blockchain technology‑based payment rails—ever scale with confidence?Will monetary policy be transmitted through banks or platforms?
As fintech companies, crypto exchanges, and wallets become primary interfaces for money, do they become the real channel through which monetary policy reaches households—even if they're not structured as banks?Is competition in payments a national strategic asset?
If the U.S. constrains its own innovators with restrictive cryptocurrency regulation, while other jurisdictions allow more flexible digital assets and rewards models, does it risk ceding leadership in next‑generation payment systems?
Businesses operating in this space should implement robust internal controls to manage regulatory uncertainty while maintaining competitive positioning.
Why this matters for your strategy
For executives and policymakers, this isn't just a niche dispute between the Blockchain Association and the American Bankers Association in Washington. It is an early test of how the U.S. will balance:
- Innovation vs. incumbency in digital payments
- Consumer protection vs. consumer upside in a world of programmable money
- Regulatory compliance vs. competitive neutrality between banks, fintechs, and crypto exchanges
As Senate Banking staff weigh letters from both sides and consider potential clarifications to the GENIUS Act, your strategic questions should be:
- If stablecoin‑based payment systems lose the ability to offer rewards, does your current roadmap still make sense?
- If regulators preserve stablecoin rewards, are you positioned to compete on incentives, user experience, and regulatory compliance simultaneously?
- How will shifts in banking regulations and cryptocurrency regulation reshape your capital flows, product design, and partnerships across financial institutions, fintechs, and digital asset platforms?
The outcome will help determine whether stablecoins become a neutral payments instrument controlled within the traditional banking industry, or a foundational layer for a broader, more open ecosystem of financial services and blockchain technology–driven innovation.
Organizations should consider implementing automated workflow solutions to manage compliance requirements across multiple regulatory frameworks. Additionally, establishing comprehensive security and compliance protocols becomes critical when operating at the intersection of traditional finance and emerging digital asset technologies. For businesses building payment infrastructure, systematic risk assessment procedures help evaluate regulatory exposure while maintaining innovation velocity.
What does the GENIUS Act say about stablecoin yields?
The GENIUS Act bars permitted stablecoin issuers from paying interest or yield directly to holders, while explicitly leaving room for third‑party platforms (exchanges, wallets, fintech apps) to offer incentives or rewards on top of stablecoins at the application layer.
Who is allowed to offer rewards on stablecoins under the current framework?
Under the law's compromise, stablecoin issuers cannot pay yield directly, but platforms and intermediaries such as crypto exchanges and fintech apps may design lawful reward programs that sit above the stablecoin issuance layer.
Why are banks lobbying to close the so‑called stablecoin "loophole"?
Banking groups argue that platform‑based stablecoin rewards resemble interest‑bearing accounts without the same safeguards, could shift deposits away from banks, and therefore threaten the deposit‑to‑loan model and the transmission of monetary policy. They want the GENIUS prohibition extended to partners, affiliates, and platforms.
What is the Blockchain Association's position?
The Blockchain Association, backed by many digital‑asset and fintech firms, urges the Senate Banking Committee to preserve the Act's original compromise. They warn that widening the ban would reopen settled law, undermine regulatory clarity during rulemaking, chill innovation, and entrench incumbents. Organizations should implement comprehensive compliance frameworks to navigate these evolving regulatory landscapes.
Are stablecoin rewards essentially the same as bank interest?
Not exactly. Bank interest is a function of deposit accounts within regulated banking balance sheets and prudential safeguards. Industry advocates say platform rewards are analogous to long‑standing non‑interest incentives (cashback, points) offered at the card and fintech layer. Regulators and banks disagree on whether the practical effect is equivalent to interest.
How real is the risk that stablecoins could pull trillions from bank deposits?
Treasury analyses cited by bank advocates have scenarios suggesting very large outflows (figures such as $6 trillion are used in lobbying), but industry groups point to studies finding no robust statistical link between regulated stablecoin use and community bank deposit losses. The size of the risk depends on adoption, regulation, and product design.
What are the broader competitive stakes?
At stake is who captures margin and customer relationships in next‑generation payments: incumbent banks that control traditional rails and card economics, or platforms (fintechs, exchanges, wallets) that could redesign incentives and user experiences around programmable digital money. Businesses operating in this space should consider implementing automated workflow solutions to manage compliance requirements across multiple regulatory frameworks.
How would banning platform rewards affect consumers?
If regulators extend the ban to platforms, consumers could lose access to higher‑yielding or innovative incentive programs tied to stablecoins, potentially reducing choice and keeping funds in low‑yield bank products. Proponents of restrictions argue this protects consumers by aligning protections with deposit‑like products.
What does this fight mean for regulatory clarity and innovation?
Industry groups warn that reopening the GENIUS Act's settled compromise during early rulemaking would undermine confidence in U.S. legislative frameworks, make long‑horizon infrastructure harder to build, and chill investment in blockchain‑based payment rails. Regulators and Congress must balance consumer protection with predictable rules that allow innovation to scale. Establishing comprehensive security and compliance protocols becomes critical when operating at the intersection of traditional finance and emerging digital asset technologies.
Could monetary policy transmission shift away from banks?
If platforms and non‑bank intermediaries become primary household interfaces for money, they could alter how monetary policy reaches consumers even if they aren't traditional banks. That possibility is central to the debate about preserving banking roles versus enabling platform innovation.
What should businesses building payments or stablecoin products do now?
Firms should assume regulatory uncertainty and prepare accordingly: implement robust compliance and internal‑control frameworks, design rewards programs that can be adjusted to different legal interpretations, document consumer‑protection safeguards, and engage with policymakers while monitoring Senate Banking Committee actions and rulemaking timelines. Additionally, conducting systematic risk assessments helps evaluate regulatory exposure while maintaining innovation velocity.
What are the near‑term next steps in this dispute?
Stakeholders are submitting letters and briefings to the Senate Banking Committee as agencies begin rulemaking under the GENIUS Act. Congress could consider clarifying language, regulators could adopt interpretations during rulemaking, and industry coalitions will continue lobbying both to preserve the compromise or to tighten the prohibition to include platforms.
Why does this matter for U.S. leadership in digital payments?
If U.S. policy overly constrains platform innovation around stablecoins while other jurisdictions adopt more flexible approaches, the U.S. risks losing competitive advantages in next‑generation payment systems and related financial‑services innovation. The policy choice will shape who builds and captures value in global digital payments. Organizations should consider implementing comprehensive cybersecurity frameworks to protect against evolving threats in the digital payments landscape.
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