- Bank lobbies spent the August recess urging changes to the Genius Act.
- Crypto experts have fired back, telling them to "move on."
- Change will be hard with such a busy docket for US lawmakers.
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Hey all, Liam here!
With summer finally coming to an end, Congress is back in Washington this week.
And if banking lobbyists have their way, lawmakers will take a second look at the Genius Act.
Yes, that stablecoin legislation that Trump signed into law in July.
A slew of lobbying groups backing banks are looking to relitigate at least two key features of Genius.
First, they want to close what they refer to as a loophole that lets crypto companies offer yield on stablecoins.
Crucial provisions that would’ve allowed issuers from doling out lucrative yields to holders were eventually struck from the legislation.
But that’s not stopping Coinbase and PayPal from moving forward, albeit issuing “rewards” rather than yield.
But how?
“First, we are not the issuer. And second, we don’t pay interest in yield, we pay rewards,” Brian Armstrong, Coinbase CEO, said during the company’s latest earnings call in July. “So, long story short, we plan to continue to pay rewards to our customers, which are very competitive.”
Competitive indeed.
Typical rates for stablecoin rewards can be as high as 5%. American banks rarely offer customers anything higher than 1%.
An April report by the US Treasury predicted that yield-bearing stablecoins will attract some $6.6 trillion in deposits from banks.
If that happened, it would undermine the lending market for consumer households, argued the Bank Policy Institute in August, an advocacy group for some of the world’s largest banks.
‘Move on’
After that, a coalition of bank industry trade associations led by the American Bankers Association sent a letter urging lawmakers to strike a key section of the Genius act.
Section 16(d) allows uninsured depository institutions with stablecoin operations to custody funds and operate a money transmission business nationwide with much less state oversight.
Crypto lobbying groups and other experts clapped back pretty quickly.
“This was no loophole and you know it,” Paul Grewal, Coinbase’s chief legal officer, said on X, responding to the BPI’s concerns over interest-bearing stablecoins. “It’s time to move on.”
A full docket
Moving on may indeed be the only option as US lawmakers are looking at a whole host of other issues to contend with, including investigating former President Joe Biden’s mental state while he was in office and issuing new sanctions on Russia.
Other representatives, such as Democrat Ro Khanna of California and Republican Thomas Massie of Kentucky, are still pushing the House to force the Department of Justice to release more information into the late Jeffrey Epstein.
Oh, and not to mention a potential government shutdown on September 30.
Liam Kelly is a DeFi Correspondent at DL News. Got a tip? Email at liam@dlnews.com.