Major US banking groups are raising concerns over proposed stablecoin legislation, warning that gaps in the bill could reshape how money moves through the financial system.
In a joint statement released Monday, leading industry bodies including the American Bankers Association and the Banking Policy Institute said the current draft does not go far enough to protect traditional deposits. While they acknowledged lawmakers are pursuing the “right policy objective” by addressing stablecoin yields, they stressed that the details could have unintended consequences.
Banks warn of deposit risks from stablecoin growth
At the center of the debate is whether stablecoins should be allowed to offer yield-like returns. Banking groups argue that if left unchecked, such incentives could draw significant funds away from traditional accounts.
Some estimates suggest the impact could be substantial. Research cited by the groups indicates that widespread adoption of yield-bearing stablecoins could lead to trillions of dollars moving out of the banking system.
Economist Andrew Nigrinis warned that this shift could reduce lending across key sectors, including consumer, small business and agricultural loans. However, White House economists have presented a more modest view, estimating that restricting stablecoin yields would only slightly increase bank lending.
The disagreement highlights a broader divide over how disruptive stablecoins could become if regulatory gaps remain.
Regulatory loophole concerns slow progress
Banking institutions have also pointed to specific language in the bill, particularly Section 404, which they say could create a loophole. According to their interpretation, crypto platforms may still be able to offer interest-like incentives while avoiding traditional regulatory oversight.
“This is a significant loophole that must be addressed,” the groups said, adding that they plan to submit proposals to strengthen the legislation.
A growing divide between crypto and traditional finance
The dispute has already slowed momentum behind the bill, raising concerns that it may not pass before the November 2026 midterm elections.
Meanwhile, the crypto industry continues to push for progress, with companies like Coinbase urging lawmakers to move forward with debate in the Senate.
The tension reflects a deeper structural challenge. Stablecoin yields are often linked to the same interest rate environment that shapes bank profitability, effectively putting the two systems in direct competition.
Some international players have taken a different approach. A European banking consortium, including UniCredit and ING, has moved to launch its own stablecoin under new regulatory frameworks, turning competition into collaboration.
