ABA Issues Stark Warning as It Uncovers Serious Loopholes in the GENIUS Act Targeting Stablecoin Legislation
The American Bankers Association sent a detailed letter to the Senate Banking Committee highlighting regulatory loopholes in the proposed GENIUS Act. It focuses on the lack of clear rules for interest‑bearing stablecoins. The association argues these gaps could destabilize the U.S. financial system. The ABA fears deposits may shift from banks to stablecoins, cutting funds available for loans. Even a modest migration could reduce lending capital by billions annually. Small businesses and agricultural producers, which rely on bank financing, would face tighter credit. Proposed stablecoins would operate like money‑market accounts without reserve requirements or FDIC insurance. Consumer protection mechanisms are undefined, increasing exposure to loss. This creates an uneven playing field between digital assets and regulated bank products. The Senate Banking Committee will review the GENIUS Act and consider amendments addressing capital, reserve, and consumer safeguards. House committees are conducting parallel debates, with several months of negotiations expected. Global regulatory moves in the EU and Asia add pressure for coordinated U.S. policy.
