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The banking industry is pushing for a legislative fix to the GENIUS Act, a law that established the first federal framework for stablecoins, a form of digital token that represents a fixed amount of a fiat currency, such as the U.S. dollar. While the GENIUS Act prohibits stablecoin issuers from directly paying interest to holders, firms including Coinbase and Circle have circumvented this restriction by offering “rewards” programs. In these arrangements, customers lend their stablecoins to a cryptocurrency platform, which then generates yield for the customers. Banks argue this is functionally identical to interest, and are asking Congress to close what they call a dangerous regulatory loophole by explicitly banning firms from offering such rewards to customers.
