Bank Lobby Targets Stablecoin ‘Interest Loophole,’ Potentially Limiting Consumer Access and DeFi Yield Opportunities

Can Consumers Earn Yield on GENIUS Act Stablecoins?

The GENIUS Act, now law, establishes a regulatory framework for payment stablecoins in the United States. Although the Act prohibits issuers from paying interest or yield directly to stablecoin holders, it does not expressly prohibit affiliates from offering consumers stablecoin yield opportunities through centralized exchanges or DeFi protocols.

In resonse, major U.S. banking groups, including the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Independent Community Bankers of America, and the Financial Services Forum, are now urging Congress to extend this prohibition to "affiliates" such as crypto exchanges or business partners.

These groups argue that without closing this “interest loophole,” affiliates could effectively offer yield on stablecoins and undermine the law’s intent. The Treasury Department has estimated that stablecoins with the ability to offer yield could lead to as much as $6.6 trillion in deposit outflows from the banking system. Banking associations say this could raise lending costs, reduce loan availability for households and businesses, and create instability during times of market stress.

But, closing the interest loophole could also reduce opportunities for decentralized finance platforms and nonbank institutions to integrate GENIUS Act-compliant stablecoins into yield-generating products. This restriction would limit one of the few remaining legal avenues for consumers to earn returns on regulated digital dollars outside of traditional banks.

If Congress adopts the banks’ request, it could result in a more centralized stablecoin market where access to compliant coins in DeFi ecosystems is curtailed and consumer yield opportunities are diminished. While the stated objective is to protect the banking system’s funding base, the move would likely narrow the role of stablecoins as an alternative payment and savings option.