In the wake of the recent passage of the GENIUS Act, a new law regulating stablecoins, tensions have emerged between traditional banking associations and cryptocurrency advocacy groups.
While the US banking associations representing all fifty states have raised alarms about potential vulnerabilities in the law, two crypto organizations, the Blockchain Association and the Crypto Council, have pushed back against proposed changes.
Crypto Advocates Warn Against Uncompetitive Environment
In a joint statement, the Blockchain Association and the Crypto Council expressed their strong opposition to the letters issued on August 12, 2025, by the Bank Policy Institute and various state bankers associations.
These letters aim to revisit issues that they argue were thoroughly addressed during the legislative process of the GENIUS Act. The groups contend that the proposals threaten to create an uncompetitive environment for stablecoins, prioritizing the interests of banks over broader industry growth, competition, and consumer choice.
They argue that payment stablecoins are fundamentally different from bank deposits or investment products, and therefore should not be regulated in the same way.
According to the GENIUS Act, stablecoin issuers are required to maintain one-to-one reserves in cash or high-quality liquid assets and operate under federal or qualified state licensing and supervision.
The crypto groups highlight that this regulatory framework is designed to ensure that stablecoins do not function like traditional bank deposits or money market funds, emphasizing their unique role in the financial ecosystem.
The advocacy groups also addressed claims that certain practices, such as exchanges sharing rewards, undermine the GENIUS Act’s prohibition on issuer-paid interest.
They argue that a level playing field is essential, allowing both banks and crypto firms to innovate and compete, particularly for underbanked consumers who increasingly rely on digital wallets.
Stablecoins Under Scrutiny
The letter further warns that eliminating features available to stablecoin users, while permitting them for banks, would unfairly favor larger legacy institutions that often fail to provide competitive returns.
One contentious point is Section 16(d) of the GENIUS Act, which allows subsidiaries of state-chartered institutions to conduct money transmission to support lawful stablecoin issuer activities across state lines.
The advocacy groups argue that repealing this provision would hinder stablecoin redemption rights for out-of-state holders, potentially creating a fragmented regulatory environment that stifles interstate commerce.
Additionally, the call to ban non-financial companies from issuing payment stablecoins is seen as an extreme measure that could stifle innovation.
In their statement, the Blockchain Association and the Crypto Council emphasize that stablecoins operate under strict reserve and supervisory requirements, with their reserves largely remaining within the traditional financial system.
They argue that allowing responsibly regulated platforms to share benefits with customers is not a loophole but rather a feature that enhances financial inclusion and fosters innovation.
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