Keith Kelly, a Republican Sen. representing Alabama’s 12th District, is warning about the potential impact of the federal bill, a genius law, two months after it was signed into law by US President Donald Trump.
In Wednesday’s operation of the 1819 News, Kelly stated that there was a loophole in the act of genius.
The bill, according to the senator, allows “cryptocurrency platforms to distribute financial compensation,” and encourages people to withdraw funds from the state’s small community banks and to withdraw close accounts.
“Unlike larger banks, community banks rely on local deposits to fund lending,” Kelly said. “If these deposits decrease, our ability to provide loans to individuals, families and small businesses will be significantly limited.”
He added:
“The losses of trustworthy lending partners are catastrophic, especially for rural agricultural communities where margins are thin and seasonal cash flow is important.”
https://www.youtube.com/watch?v=ry9mi57pbjs
The law was signed on July 18th, but the Genius Act will not come into effect anytime soon. The law requires the US Treasury Department and the Federal Reserve to finalize regulations related to the bill. This is a process that began in August with the former seeking public comment focusing on detecting illegal activities.
Related: Bank lobbies fight to change the act of genius: Is it too late?
Supporters of the Genius Act argue that the bill “promotes” “innovation” in the United States by establishing clarity in regulations for Stablecoin publishers. However, others have warned about legal issues, along with concerns about stable issues that indirectly pay the yield.
“The loopholes for foreign publishers were not fully fixed,” Timothy Massad, a Kennedy government researcher at Harvard University and a former chairman of the US Commodity Futures Trade Commission (CFTC), told Cointelegraph in August.
Critics argue that the law can place US-based Stablecoin publishers at a competitive disadvantage for foreigners by creating restrictive rules. Genius, according to Massad, allows foreign Stablecoin publishers to operate in the United States if they are subject to “equal” regulatory and supervision regimes.
Bank groups also sound alarms for genius “loophole”
The loophole mentioned by the Alabama Senators appeared to be attributable to the following clause:
“A permitted payment shall be paid by the Stablecoin Issuer or the foreign payment Stablecoin Issuer to the holder of payments of any form or yield of interest (cash, tokens or other considerations) in connection with the holding, use or retention of such payment stability.”
However, the text of the bill did not expressly state that Stablecoin issuers were unable to provide yields using cryptocurrency exchanges or affiliates, potentially unable to circumvent the law.
“We allow these cryptocurrency companies to act like banks and offer rewards and yield products. It’s not an innovation without playing with the same rules,” Kelly said. “It’s a regulatory ruling, putting the risks to American families and our local economy.”
In August, the Bank Policy Institute reflected similar concerns about geniuses, claiming that the law could lead to a $6.6 trillion deposit outflow from traditional banks, disrupting the flow of credit to communities that rely on it.
The timing of Kelly’s concerns was unclear. It was unclear considering that it was months after Republicans began drafting the law in the U.S. House of Representatives, and about two months after the genius was signed into law.
Cointelegraph contacted the Alabama Senator for comment, but did not receive a response at the time of publication.
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