The passage and enactment of the GENIUS Act in the US, on July 18, 2025, marked a turning level for the monetary trade.
The authorized textual content, designed to determine a regulatory framework for secure cryptocurrencies, expressly prohibits their issuers from paying direct curiosity to holders. Nonetheless, it doesn’t forestall intermediaries – primarily exchanges and custody platforms – from doing so.
This distinction has generated an argument that, within the phrases of analyst Simon Taylor, “has enraged the foyer banking”.
As you see it, the GENIUS Act, which regulates the issuance and buying and selling of stablecoins in the US, “created a loophole” that permits issuers to share returns by third events. In his opinion, banks wish to shut that loophole, “however now we have seen this film earlier than: Fintech was born from conditions like this,” he remembers.
In response to Taylor, stablecoin issuing corporations, equivalent to Circle, which is behind USDC, earn returns from reserves deposited in Treasury Division bonds with charges above 4%.
He explains that the issuers “preserve a portion of the cash and switch the remainder to distributors like Coinbase,” which is the biggest cryptocurrency alternate in the US and which, exactly, gives 4.1% rewards to USDC customers on its platform.
The Financial institution Coverage Institute (BPI), which represents the primary monetary entities in the US, considers that the regulatory vacuum across the returns supplied succinctly by stablecoin issuing corporations, threatens the steadiness of the monetary system.
In a latest report, the company warns that the ban on the problem of yields “is well circumvented” and that, if this evasion continues to be allowed, “the demand for stablecoins may double.”
The BPI additionally warns of attainable negative effects. “If stablecoins are backed by Treasury bonds, financial institution deposits may fall by as much as 20%,” he factors out. “If as an alternative they’re backed by uninsured deposits, the chance of a monetary run would enhance,” he provides.
For the institute, stablecoins “put policymakers between a rock and a tough place”by altering the stability between financial institution credit score and public financing.
Certainly, banks launched a marketing campaign in opposition to stablecoin rewards. Final week, Coinbase’s head of authorized affairs, Paul Grewal, criticized that enormous banking establishments are pressuring the US Congress to remove these advantages.
«The large banks try to reverse the legislation (GENIUS). They need a bailout as a result of competing with merchandise that usually suck is, nicely, tough. Stablecoin rewards have to be maintained. This mission got here into impact a month in the past and is now legislation,” Grewal wrote on his social networks.
From the Durbin case to the GENIUS mannequin
For Simon Taylor, the present battle bears similarities to the 2011 Durbin Modification, which restricted charges for debit card transactions.
“Durbin was the primary monetary innovation laboratory with out that means to,” he says. «Massive banks misplaced margin, however small banks and fintech corporations discovered a possibility for regulatory arbitrage. At the moment the identical factor is occurring with stablecoins,” he says.
Taylor remembers that, after Durbin, fintechs equivalent to Chime, Money App and Sq. partnered with group banks that weren’t topic to the restrict. «They issued playing cards, charged greater charges and used that earnings to supply early funds, remove overdrafts and aggressively purchase prospects. The mannequin labored: neobanks grew on the regulatory distinction,” he explains.
Presently, the sample is similar, in accordance with the specialist, who emphasizes that the stablecoin issuer focuses on compliance and stability, and the distributor, which might be the exchanges, on the person expertise. “That creates specialization and generates worth,” says Taylor.
Taylor feedback that banks see stablecoin rewards as substitutes for depositshowever, of their perspective, “they’re substitutes for money.”
He considers that these digital belongings “mix the portability of bodily cash with digital infrastructure, permitting worth to be maintained outdoors the banking system, incomes yield, shifting it 24/7 and liquidating immediately.”
Nonetheless, the analyst doesn’t consider that the banking system is doomed, however relatively that it should adapt. He means that banks “will see a possibility, not a risk” on this sector.
It’s because, in his opinion, “stablecoins open up new sources of earnings: cost processing, forex conversion and sponsor financial institution fashions.”
“Neighborhood banks could be the infrastructure layer for issuers, incomes return on reserves and sustaining their regulatory benefit,” Taylor says.
Para Austin Campbell, CEO de Zero Information, Banks are ready to compete in opposition to the rise of stablecoins. He factors out that the issue just isn’t the expertise itself, however the construction of the system.
«Banks are conglomerates which might be tough to handle. There isn’t any purpose for a similar establishment to mix deposit-taking, lending and danger administration. “They have to specialize: some in credit score, others in funds or rates of interest,” says Campbell.
For him, It’s essential to dismantle the standard construction of banksin order that they’ll begin competing in opposition to stablecons and their returns. He explains that conventional monetary entities “have benefits that fintech corporations can not but replicate.” That is entry to credit score and card franchises.
Taylor partially agrees with Campbell, stating that the Durbin Modification created neobanks and the GENIUS Act “is creating built-in finance powered by stablecoins.” “Historical past doesn’t repeat itself, however it rhymes,” he mirrored.
“Authorized loophole or respectable evolution?”: Bracamonte’s imaginative and prescient
For Juan Blanco Bracamonte, marketing consultant specialised in cryptocurrencies and CEO of BitData Venezuela, The controversy just isn’t restricted to a regulatory challenge. In dialogue with CriptoNoticias, he explains that the rewards supplied by platforms like Coinbase on stablecoins like USDC have a broader studying.
“Sure, there’s a regulatory grey space, but additionally proof of a structural transformation: customers demand efficiency, transparency and quick liquidity,” says the specialist, then underlines that conventional banking “has monopolized the cost of curiosity, however now competes with decentralized fashions that function on decentralized networks.”
«Authorized loophole or evolution? It relies on the method: for regulators, it’s a risk; for innovators, a possibility to democratize entry to monetary efficiency,” he says.
Bracamonte provides that each the Durbin Modification and the GENIUS Act “catalyze disruptions: the primary in funds, the second in deposits. In each instances, banking is compelled to reinvent itself.
He clarifies that stablecoins are not easy switch devices, however “catalysts of a profound transformation of the monetary system”, and that, due to this fact, The adaptability of banks shall be elementary to their very own survival.
The power of stablecoins to supply yield, liquidity and accessibility is difficult conventional constructions and forcing banks, regulators and customers to rethink the worth of digital cash. Moreover, the GENIUS Legislation isn’t just a regulation, however the starting of a brand new period the place competitors doesn’t happen between establishments, however between fashions. The longer term is not going to belong to those that have extra energy, however to those that finest perceive tips on how to use it.
Juan Blanco Bracamonte, marketing consultant and CEO of BitData Venezuela.
The controversy concerning the GENIUS Legislation and stablecoins exposes a structural rigidity between regulation and innovationthe place every part factors to a future coexistence the place monetary ecosystems will profit from one another.
The truth is that the monetary system has already taken a flip and, consequently, banks should have the ability to adapt, until, in fact, they wish to lead a transparent and imminent hole.
