The American Bankers Association (ABA) along with 52 state bankers’ associations across the United States are urging the U.S. Department of the Treasury to implement the GENIUS Act’s prohibition on interest for payment stablecoins.
In a letter to the Treasury Department, ABA and the 52 state organizations emphasized the need to preserve the law’s core intent — ensuring stablecoins serve as payment tools, not investment vehicles.
“The GENIUS Act’s prohibition on a payment stablecoin issuer paying interest or yield on payment stablecoins reflects Congress’s intent for payment stablecoins to be used for transactions and not as investment vehicles,” the associations wrote in the letter. “Treasury must reinforce this intent.”
Without a broad interpretation of the interest ban, digital asset platforms may exploit loopholes to offer high-yield rewards and other incentives, the association warns in the letter. This, they said, would undermine the law’s purpose and threaten the traditional banking system.
The letter cites recent comments from U.S. Sen. Mike Rounds (R-SD), who said: “This looks to me like it’s an end-run on the original legislation.”
The association said that community banks are particularly vulnerable to deposit outflows caused by interest-bearing stablecoins. They said it could result in a 25.9 percent loss in deposits, eliminating approximately $1.5 trillion in lending capacity and shrinking small business and farm credit by $110 billion and $62 billion, respectively.
The associations made several recommendations to ensure effective enforcement. They include defining “interest or yield” broadly, including any economic benefit regardless of its label; preventing evasion through affiliates or partners, treating indirect payments as issuer payments; and avoiding narrow interpretations of “solely,” ensuring that any benefit tied to holding a stablecoin triggers the prohibition.
“The digital assets landscape is evolving rapidly, and thoughtful, balanced rulemaking is needed to ensure it develops in a way that supports—not disrupts—the broader financial system,” the groups said in the letter.