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Seeds of Wisdom
U.S. Banks Warn Congress: Close GENIUS Act Stablecoin Loophole Before It Disrupts the Financial System
A coalition of major U.S. banking organizations is calling on Congress to close a critical loophole in the newly enacted GENIUS Act, warning that it could allow stablecoin issuers to offer yields through affiliate businesses — a move they say could drain trillions from the banking system and destabilize the U.S. credit market.
The Loophole at the Heart of the Dispute
Signed into law on July 18, the GENIUS Act prohibits stablecoin issuers from directly paying interest or yield to token holders. However, it does not explicitly extend this restriction to crypto exchanges or other affiliated platforms.
This omission, banking groups argue, creates a backdoor for issuers to indirectly pay yields, sidestepping the law’s intent and undermining the banking sector’s ability to retain deposits.
The Bank Policy Institute (BPI) — joined by the American Bankers Association, Consumer Bankers Association, Independent Community Bankers of America, and the Financial Services Forum — warned in a letter to Congress that this gap could trigger a deposit flight of up to $6.6 trillion from the traditional banking system.
Why Bankers See a Risk
Banks rely on deposits to fund loans for households and businesses. If large amounts of capital shift into yield-bearing stablecoins, credit availability could shrink, interest rates could climb, and borrowing could become more expensive for Main Street.
According to the April U.S. Treasury report cited in the letter, such an outflow could:
- Increase deposit flight risk, especially during periods of market stress.
- Reduce overall credit supply in the economy.
- Lead to higher loan costs for businesses and consumers.
The Competitive Edge of Yield-Bearing Stablecoins
Yield is one of the strongest marketing tools for stablecoin adoption.
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- Some stablecoins offer built-in rewards, while others — such as Circle’s USDC — provide incentives through exchanges like Coinbase and Kraken.
- Coinbase CEO Brian Armstrong insists these payments are “rewards,” not “interest,” arguing they fall outside the GENIUS Act’s restrictions.
- PayPal has also indicated it plans to continue offering incentives for its stablecoin users.
Bankers counter that stablecoins differ fundamentally from bank deposits or money market funds because they do not fund loans or invest in securities to generate returns. Instead, they are designed to maintain a fixed peg, meaning any yield offered would be purely a competitive draw for deposits, not a driver of economic growth.
Market Context
- Stablecoin Market Cap: $280.2 billion as of mid-2025.
- Dominance: Over 80% controlled by Tether (USDT) and USDC.
- U.S. Money Supply Comparison: Stablecoins are still a fraction of the $22 trillion U.S. dollar supply.
- Growth Projections: Treasury estimates the stablecoin market could reach $2 trillion by 2028.
Balancing Dollar Dominance with Financial Stability
Crypto industry analysts argue that the GENIUS Act — by legitimizing and promoting dollar-backed stablecoins — could strengthen U.S. dollar dominance on the global stage, especially in competition with rival currencies.
However, bankers warn that without tighter rules, the same growth could come at the cost of domestic financial stability.
As the stablecoin sector expands, the fight between innovation and regulation is intensifying — and lawmakers may soon have to decide whether this “gray zone” in the GENIUS Act will be closed or exploited.
@ Newshounds News™
Sources: Coinpedia and Cointelegraph
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SEC Shifts Focus to Clear Crypto Rules After Ripple Settlement
The U.S. Securities and Exchange Commission (SEC) is turning its attention toward crafting a clear regulatory framework for cryptocurrency, following the conclusion of its nearly five-year legal battle with Ripple Labs.
Case Closure Frees Regulatory Focus
The dispute, which began in December 2020, ended after both parties agreed to drop appeals and cover their own legal costs. SEC Commissioner Hester Peirce called the resolution a “welcome development” that frees resources for policymaking.
SEC Chair Paul Atkins echoed this sentiment, stating that the agency can now move “from the courtroom to the policy drafting table” to build rules that encourage innovation while protecting investors.
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Background of the Ripple Case
- The SEC alleged Ripple raised $1.3 billion through unregistered XRP sales.
- In July 2023, Judge Analisa Torres ruled XRP was not a security for retail sales, but was a security in institutional sales.
- Ripple was fined $125 million in August 2024.
Push for the CLARITY Act
The conclusion of the Ripple case comes as lawmakers debate the CLARITY Act, a bill intended to define digital assets more clearly under U.S. law. Republican sponsors aim to pass it by Sept. 30, alongside the Anti-CBDC Surveillance State Act, which seeks to block a U.S. central bank digital currency.
However, opposition is mounting. Key D-------s, led by Rep. Maxine Waters, have labeled the package “dangerous” and a-----d Republicans of fast-tracking it without sufficient safeguards.
Key Takeaway
With Ripple litigation behind it, the SEC faces mounting pressure to deliver well-defined crypto regulations that can balance innovation, investor protection, and political consensus.
@ Newshounds News™
Source: Cointelegraph
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DeFi Advocates and a16z Call on SEC to Establish Safe Harbor for Blockchain Apps
The DeFi Education Fund and venture capital giant Andreessen Horowitz (a16z) are urging the U.S. Securities and Exchange Commission (SEC) to create a regulatory safe harbor for certain blockchain applications — a move they say would provide much-needed clarity for developers and preserve the SEC’s authority over high-risk activities.
Proposal for a Safe Harbor
In a letter to SEC Commissioner Hester Peirce, the groups proposed a framework that would exempt qualifying blockchain apps from the agency’s broker-dealer rules.
To qualify, an app must:
- Be non-custodial (not hold user assets)
- Avoid making recommendations or exercising discretion over user activity
- Be built on decentralized underlying protocols
These conditions, they argue, reflect the reality that most blockchain applications are passive software tools enabling users to interact directly with public, decentralized networks — not intermediaries acting like traditional brokers.
Regulatory Shift Under T------------------n
The proposal comes amid a noticeable regulatory pivot under the T------------------n:
- Creation of a crypto task force to establish a more “sensible” regulatory path
- Termination of investigations into several crypto firms
- Launch of Project Crypto to modernize SEC rules for digital assets
Previously, the SEC had hinted that certain apps — including Coinbase Wallet, Uniswap Labs, and OpenSea — might need to register as brokers. Enforcement actions and investigations into these platforms were ultimately dropped, including a court dismissal of broker a---------s against Coinbase Wallet.
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Flexibility for Developers
Amanda Tuminelli, Executive Director of the DeFi Education Fund, emphasized that the safe harbor is designed to be adaptable:
“Developers deserve clarity. Our hope is to provide guidelines that allow front-end developers to build without fear of being subjected to outdated requirements misaligned with modern technology.”
Why It Matters
Supporters argue that without a safe harbor, U.S. blockchain innovation risks being stifled by uncertainty and misapplied regulatory frameworks — potentially pushing development overseas.
@ Newshounds News™
Source: The Block
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Source: Dinar Recaps
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Brazil Leads BRICS Toward Historic Common Currency Launch by 2026
The BRICS common currency initiative is entering its most advanced phase yet, with Brazil spearheading efforts toward what analysts forecast as a potential 2026 launch. Recent developments include progress on digital payment systems, expanded local currency settlements, and blockchain-based infrastructure — positioning the project as a direct challenge to U.S. dollar dominance.
Momentum Builds After 2024 and 2025 Summits
- 2024 BRICS Summit in Kazan saw major breakthroughs in monetary cooperation. Russian President V------------n was seen with what appeared to be a prototype BRICS banknote.
- P---n emphasized that BRICS is not rejecting the dollar outright but is seeking alternatives due to restrictions on its use:
“If they don’t let us work with [the dollar], what can we do? We have to look for other alternatives, which is happening.”
- 2025 Brazil Summit maintained currency momentum despite some high-profile absences. Analysts now view 2026 as a realistic target for the rollout, with digital settlement mechanisms being implemented across member nations.
U.S. Tariffs Accelerate De-Dollarization
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- U.S. tariffs on Brazilian exports under the T------------------n have intensified BRICS’ push for a shared currency.
- Brazilian President Luiz Inácio Lula da Silva and Chinese President Xi Jinping have pledged deeper cooperation to resist “unilateralism and protectionism.”
- Diplomatic strains escalated after Brazil’s Finance Minister canceled a meeting with the U.S. Treasury Secretary.
Economic Benefits and Strategic Impact
- Reduced dollar dependency and greater transaction efficiency are top economic drivers for the BRICS currency project.
- Iranian Ambassador to Russia Kazem Jalal stressed that the initiative would help member nations bypass the impact of U.S. sanctions.
- Integration of blockchain technology and central bank digital currencies (CBDCs) is advancing, enabling a modern settlement framework.
2026 Implementation Path
Brazil’s leadership is focused on aligning monetary policies, inflation management, and payment infrastructure across BRICS members. Despite varying economic conditions, the bloc is consolidating around shared frameworks to ensure the currency’s successful rollout.
@ Newshounds News™
Source: Watcher Guru
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Source: Dinar Recaps
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