January 10, 2026. Major U.S. banking conglomerates have opened a new front in the regulatory war on crypto, launching a coordinated lobbying campaign to close what they term a "loophole" in the recently enacted GENIUS Act. Their target: the 4-5% yields offered by exchanges like Coinbase on stablecoin deposits.
While the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, signed into law July 2025, explicitly prohibits stablecoin issuers from paying interest, banks argue it failed to block third-party exchanges from passing Treasury yields to users. Now, the American Bankers Association (ABA) and Bank Policy Institute are pressuring Senate lawmakers to extend the ban to all crypto intermediaries.
The $360 Billion "Hidden Tax"
The aggression stems from a tangible threat to the traditional banking business model. A report cited by CryptoSlate estimates that banks generate over $360 billion annually from a combination of credit card swipe fees and the spread on customer deposits held at the Federal Reserve. This equates to roughly $1,400 per U.S. household.
High-yield stablecoins directly cannibalize this revenue. By offering near-risk-free yields derived from U.S. Treasuries, platforms like Coinbase and Kraken are effectively outbidding traditional savings accounts, which continue to offer near-zero interest despite high federal rates.
The "Loophole" Battleground
The conflict hinges on statutory interpretation. The GENIUS Act was designed to prevent stablecoins from functioning as unregulated securities. However, crypto exchanges argue their reward programs are marketing incentives or pass-through mechanisms, not "dividends" from an issuer.
"While the act bans issuers from paying interest… it doesn't explicitly prevent affiliated exchanges or platforms from offering rewards," noted a Grant Thornton analysis of the legislation.
Banks characterize this as regulatory arbitrage. In a letter to the Treasury Department, banking trade groups warned that unchecked stablecoin rewards could trigger a massive migration of capital. A Treasury report validated these fears, estimating up to $6.6 trillion in deposits could eventually exit the banking system for on-chain alternatives if yield disparities persist.
Market Impact
The lobbying push has rattled markets. Coinbase (COIN), which relies heavily on stablecoin interest income for its revenue, faces significant downside risk if the "loophole" is closed. Meanwhile, decentralized competitors like MakerDAO (DAI) and Ethena (USDe), which operate outside the direct purview of the GENIUS Act's centralized issuer restrictions, could see increased inflows as users flee regulated U.S. platforms.
The crypto industry has launched a counter-offensive, framing the bank lobby's efforts as anti-competitive. "They are trying to legislate their competition out of existence rather than competing on value," a Coinbase spokesperson stated in response to the hearings. Congress is expected to review proposed amendments to the market structure bill later this month.
