US Banking Groups Call for Closure of Stablecoin Yield Loophole
- Bank Policy Institute (BPI) and other banking groups warned that stablecoin issuers could exploit a loophole to offer yields, potentially leading to $6.6 trillion in deposit outflows.
- The GENIUS Act prohibits stablecoin issuers from offering interest but does not extend this ban to affiliated businesses like crypto exchanges.
- Stablecoins currently have a market cap of $280.2 billion, significantly smaller than the US dollar money supply of $22 trillion.
- Over 80% of the stablecoin market is dominated by Tether (USDT) and USDC, valued at $165 billion and $66.4 billion, respectively.
- The Treasury projects the stablecoin market could grow to $2 trillion by the year-end of 2028.
The BPI argues that allowing interest on stablecoins could destabilize credit creation in the economy, increasing risks during financial stress periods. This concern highlights the distinction between payment stablecoins and traditional bank deposits or money market funds.
If the loophole remains open, it could lead to significant shifts in deposits away from traditional banks, as indicated by potential outflows reaching $6.6 trillion.(Source)
