The Community Bankers Committee under the American Bankers Association recently pressured the Senate to add a strict provision to the ongoing cryptocurrency regulation bill—namely, that stablecoin-related parties (such as exchanges) cannot circumvent regulation by offering yields or interest as a workaround.

Here's the situation: although the GENIUS Act has long explicitly prohibited stablecoin issuers from paying interest directly to users, some platforms have found a workaround—they do not pay interest themselves but instead have exchanges or other partners do so. As a result, users can still earn returns on their holdings, effectively "creative interpretation" of the bill's original intent.

Bankers' concerns are straightforward: if stablecoins continue to operate this way, they could steal deposit and lending business from traditional banks. Earlier, the Financial Policy Research Institute issued a stern warning, stating that if this loophole isn't closed, up to $6.6 trillion in deposits could flow into the crypto sector.

It appears to be another round of competition between traditional finance and emerging markets. How regulators will ultimately respond depends on whether this legislation can truly close all possible loopholes.