A financial battle is heating up in the United States. On one side are the country’s established banks. On the other, a growing wave of cryptocurrency innovators. At the heart of this clash is a new law. It’s called the GENIUS Act, and it sets rules for digital money known as stablecoins.
US bankers are worried. They think this new law gives unfair benefits to stablecoin firms. These firms might have an edge over banks with federal insurance. This could shake up how credit flows and how much money stays in bank accounts. Two major crypto groups recently sent a strong letter to the US Senate. They pushed back against US bankers. The bankers want to change the GENIUS Act. Bankers believe this law gives stablecoin companies an unfair edge. They worry about federally insured banks. They also fear GENIUS could upset the credit market. It might even empty out bank deposits.
The crypto world in the United States is fighting back. Bankers are trying to change a new law. This law, called the GENIUS Act, sets up rules for stablecoins. The Blockchain Association and the Crypto Council for Innovation lead the charge. These two big crypto advocacy groups sent a letter to lawmakers. They disagreed with the American Bankers Association (ABA) and other banking groups. Those groups claim the stablecoin law needs new wording. Crypto supporters say the bankers’ ideas favor old-school financial firms. This would limit who can compete. It would also reduce choices for everyday people. This especially hurts those who do not use banks.
Old Rules, New Money
The GENIUS Act became law last July. President Donald Trump signed it. It allows stablecoins to operate under a new framework. Stablecoins are digital tokens. They aim to keep a steady value. They are usually tied to real money like the US dollar. This law makes it easier for non-federally insured groups to issue them.
One key part is Section 16(d). It lets non-bank groups send money across the country. They don’t need separate state licenses for this. Banks don’t like this part. They say it creates “regulatory arbitrage.” They claim it gives stablecoin companies an unfair edge over federally insured banks.
In a letter to the Senate Banking Committee, crypto supporters spoke out. They rejected a proposal from the ABA and other bank groups. These groups want to remove Section 16(d). They also want to ban yield programs from stablecoin issuer affiliates. Crypto advocates argued these changes would cement old banks’ power. This would slow down new ideas. It would also limit chances for consumers, especially those without banking access.
Bankers Sound the Alarm
Bank groups insist the GENIUS Act has a loophole. It lets stablecoin affiliates offer interest or yields. Yet the law forbids direct stablecoin issuers from doing the same. In a letter to key senators last week, banks expressed deep concern. They fear this could pull $6.6 trillion in deposits from the banking system. This would hurt banks’ ability to lend money. They also argued that letting uninsured groups work nationwide without specific state licenses weakens current rules.
Crypto advocates fired back. They cited a Charles River Associates study from July 2025. It shows no real proof of stablecoins causing a huge flight of deposits from local banks. They also pointed out that stablecoin reserves actually help the financial system. These reserves often sit in commercial banks and Treasury securities. This helps facilitate credit.
A Matter of Choice and Big Numbers
Pro-crypto groups stressed that stablecoins offer a strong alternative. This is especially true for people without bank accounts. Traditional checking accounts give very little interest, about 0.07% APY. The Federal Reserve’s rate is much higher, around 4.25% to 4.50%. “Taking away these features for stablecoin users, while banks still offer them, would tilt the scales,” they wrote in their letter. This would reduce choices for consumers, they said.
Faryar Shirzad, Coinbase’s policy director, criticized the banks on social media. He felt their projected loss figures were too high. “If customers truly moved $6 trillion from banks to stablecoins,” he asked, “what does that say about the value consumers feel they get from their banks?” He implied that people might not be happy with old banks.
The banking lobby’s claim that stablecoins will cost them $6 trillion in deposits is mind blowing — and not in a good way. Here’s the truth: while we’re excited about stablecoins, nobody credible is predicting a $6T market. Let’s unpack why this number is pure fiction. pic.twitter.com/6a1gdSTJ6t
— Faryar Shirzad 🛡️ (@faryarshirzad)
The Road Ahead
The GENIUS Act is now law. But another bill, the CLARITY Act, could change things again. This broader crypto market bill passed the House. It is now sitting in the Senate. It might allow for more reviews of stablecoin rules.
Senator Tim Scott, a Republican and head of the Senate Banking Committee, feels hopeful. He thinks the CLARITY bill could be done by late September. But he knows some, like Senator Elizabeth Warren, might resist it. Banks want to use this new lawmaking chance to tweak the GENIUS Act. They want it to benefit them. The crypto industry, though, is firm. They want to protect the current rules. They say these rules promote new ideas and a fairer money system.