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Banking Groups Urge Congress to Tighten GENIUS Act Loopholes Amid Deposit Flight Fears

Banks, regulators, and consumer advocates oppose GENIUS Act provisions overriding state oversight of certain banks, amid warnings over stablecoin loopholes and potential multi-trillion-dollar deposit outflows.

Fact Check
Multiple credible sources directly corroborate the statement. Evidence from The Block, Cointelegraph, and Decrypt explicitly mentions that banking groups, including the American Bankers Association and the Bank Policy Institute, are urging Congress to fix loopholes in the GENIUS Act. The primary motivation cited across these sources is the concern over potential 'deposit flight' to stablecoins.
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Summary

The proposed U.S. GENIUS Act faces criticism from banks, state regulators, and consumer groups, particularly over Section 16(d), which would permit certain uninsured, state-chartered banks to operate nationwide under the Office of the Comptroller of the Currency’s authority without state approval. Opponents argue this measure threatens state regulatory powers and could harm financial stability, urging the Senate Banking Committee to remove it. Banking associations have also warned of unresolved loopholes in the Act’s restrictions on stablecoin interest payments, which they claim could lead to $6.6 trillion in deposit outflows. Coinbase executives have disputed the scale of these projections.

Terms & Concepts
  • Stablecoin: A cryptocurrency pegged to a fiat asset designed to maintain a stable value and reduce volatility.
  • GENIUS Act: U.S. legislation governing stablecoins and certain banking operations, which has provisions restricting interest payments and altering oversight for specific state-chartered banks.