GENIUS Act Sparks Clash as Banks Push to Limit Stablecoin Yields

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The U.S. Senate’s GENIUS Act is turning into a battleground over who controls returns on digital dollars. At the center of the debate is stablecoin yield, a feature that has helped crypto products compete directly with traditional bank deposits. As lawmakers push to finalize the bill, pressure from the banking sector is shaping how far stablecoin rewards may be allowed to go.

Why Banks Are Pushing Back

Stablecoins have gained traction because they offer something banks rarely do: higher, more flexible yields combined with fast, programmable payments. That advantage has started to threaten the traditional deposit model. Reports suggest U.S. banks are lobbying lawmakers to limit how and where stablecoin rewards can be offered, arguing that unchecked yields pose risks to consumers and financial stability.

What Restrictions Are Being Considered

Whereas the current discussions include limiting stablecoin rewards to transaction-based activity rather than passive holdings, or allowing yields only through regulated financial institutions. If implemented, both options would significantly reduce access to yield for everyday users and restrict the role of DeFi platforms, which currently drive much of stablecoin innovation.

Industry participants warn that such changes would strip stablecoins of their key appeal, turning them into low-utility digital cash rather than competitive financial tools.

Crypto Industry Pushes Back

Crypto advocates view the proposed limits as a protectionist move. Crypto analyst Sander Lutz reported that Senate Banking staff recently held a call with crypto industry leaders and indicated that traditional finance’s push to change stablecoin yield rules is gaining bipartisan support. Proposals under discussion include limiting yields to transaction activity rather than deposits or restricting yield offerings to regulated financial institutions. He added that Senate staff signaled significant hurdles remain, with one source saying they would “need prayers” to get the bill finalized ahead of the January 15 markup, highlighting how difficult the negotiations still are.

Responding to the issue, legal experts like John E. Deaton argue that this is less about consumer safety and more about banks defending market share. By capping yields, critics say lawmakers risk reducing user choice and slowing innovation in digital payments.

Crypto analyst Mike Novogratz criticized U.S. lawmakers, saying it’s troubling that Congress appears more focused on protecting bank profit margins than serving consumers. He added that both Democrats and Republicans need to reflect on who they are truly representing.

While Bill Hughes said he came away from the discussion feeling more bullish than before, noting that while challenges remain, progress is closer than ever. He emphasized that knowledgeable people are guiding the process and expressed overall optimism.