Key Takeaways
- The Blockchain Association said more than 125 companies and industry groups have joined a pushback against proposals that would extend the GENIUS Act’s ban on stablecoin yield beyond issuers themselves.
- It argued that the move could potentially narrow competition and constrain innovation across the payments and digital asset sector.
A growing coalition of crypto and fintech companies is urging US lawmakers to resist efforts that could further restrict how stablecoins are used across digital platforms, warning that expanded limits on customer rewards could reshape the market in favor of traditional financial institutions.
In a recent letter sent to the Senate Committee on Banking, Housing, and Urban Affairs, the Blockchain Association said more than 125 companies and industry groups have joined a pushback against proposals that would extend the GENIUS Act’s ban on stablecoin yield beyond issuers themselves. The organization, in its letter, argues that such an expansion would narrow competition and constrain innovation across the payments and digital asset sector.
The GENIUS Act, signed into law earlier this year by US President Donald Trump, prohibits permitted stablecoin issuers from paying interest or yield directly to holders. However, the law does not explicitly prevent exchanges, wallets, or other third-party platforms from offering incentives linked to stablecoin balances — a distinction that has now become the focus of an intensifying policy debate.
“Congress prohibited stablecoin issuers from paying interest or yield to those holding stablecoins, while intentionally preserving the ability of platforms, intermediaries, and other third parties to offer lawful rewards or incentives to consumers,” the Blockchain Association wrote. “That distinction was not accidental.”
Meanwhile, industry representatives argue that third-party rewards function similarly to incentives long used in the traditional financial system, such as bank promotions or credit card rewards. Several critics have highlighted that preventing crypto platforms and exchanges from offering comparable benefits, they say, would give established payment providers a structural advantage while limiting consumer choice.
However, banking groups see the issue in a different light. Trade associations, including the American Bankers Association, have pressed lawmakers to clarify that the GENIUS Act’s restrictions should apply not only to issuers but also to their partners and affiliates. They argue that allowing third-party rewards could undermine the intent of the law and accelerate the movement of deposits out of the banking system.
Those concerns have been amplified by Treasury analyses cited by bank advocates, which estimate that stablecoins could, under certain scenarios, draw over 6 trillion USD away from bank deposits. The figure has featured prominently in arguments calling for tighter guardrails around stablecoin incentives.
The Blockchain Association has rejected those claims, arguing that there is limited evidence that rewards tied to stablecoins threaten bank lending or financial stability. The group maintains that deposit levels are not the primary constraint on bank credit and that consumer-facing incentives mainly help users offset inflationary pressures.
“Rewards and incentives are a standard feature of competitive markets,” the association said, adding that payment stablecoins will struggle to gain traction if they are prevented from competing on similar terms with existing payment tools.
The dispute comes as regulators move forward with broader stablecoin oversight. On Tuesday, the Federal Deposit Insurance Corporation (FDIC) released a proposal that would allow banks to issue stablecoins through subsidiaries, subjecting both entities under FDIC supervision, including reserve requirements and financial assessments.
