The American Bankers Association, the Institute of Banking Policy and banking groups in more than 50 states have called for Congress to close “some loopholes” in the recently enacted Genius Act, and warn of the nation’s first major key things. Stablecoin The law includes gaps that could cause large deposits and undermine traditional banking systems.
In a letter addressed to Senate Banking Committee leaders on Tuesday, the coalition warned that “limits are easily circumvented as the exchange or other third parties can still provide compensation to stable holders,” despite the genius act prohibiting the issuer of stubcoin from paying direct interest.
The loophole could cause Americans to move money from bank deposits to stupid stubcoins that support surrender, destroying the flow of credit for businesses and families, the letter said.
A Treasury report in April estimated that it could cause deposit outflows of up to $6.6 trillion, depending on whether stubcoin can provide interest or yields.
According to Coingecko, all Stablecoins have a market capitalization of $280.3 billion, an increase of about 0.6% over the past 24 hours.
“Encouraging the transition from bank deposits and money market funds to stubcoin will increase lending costs and reduce lending to businesses and consumer households,” the group said.
“Relatively low” threat
Musheer Ahmed, founder and MD of Finstep Asia, said Decryption The threat Stablecoins poses to traditional bank deposits is that they are “relatively low as most retail users are unlikely to jump to Stablecoin providers until they gain trust.”
Even if deposits are separated from traditional banks, Ahmed suggested that the impact could be manageable as “crypto lending is likely to recover and compensate for the gap” and “circulation stability could increase and balance this issue.”
He advocated clearer regulatory guidance and called it “has SEC/CFTC issuance guidelines for crypto-based lending” in light of past enforcement actions on fraudulent crypto loans.
The banking group urged Congress to “prohibit the interests of stablecoin issuers to cover digital assets exchanges, brokers, dealers and related entities” to prevent the avoidance of genius. Law360 Report.
They also removed the approval pathways that allow non-financial businesses to issue stables, warned that “substantial risks and marked a major change in federal policy,” and called for the repeal of provisions that allow distinctive national issuers to operate nationwide without adding surveillance.
The Signature Ceremony for the Genius Act collected figures from the major crypto industry, including Coinbase CEO Brian Armstrong and Circle CEO Jeremy Allerle.
Major Stablecoin companies are moving rapidly to apply the new framework by submitting national trust charters to the office of the Currency Secretary, following similar applications from Circle and Ripple.
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