US community banks are calling for amendments to the GENIUS Act to close the "yield loophole" in stablecoins.

US community banks are pushing Congress to amend the GENIUS Act to close what they believe are regulatory loopholes that allow stablecoins to "indirectly offer interest." The Community Banking Council of the American Bankers Association wrote to the Senate this week, stating that some stablecoin issuers indirectly provide returns to holders through third parties such as digital asset exchanges, weakening the Act's prohibition on stablecoin interest payments. The GENIUS Act previously explicitly prohibited stablecoin issuers from directly offering interest or returns to holders to avoid competition with bank savings accounts. The Community Banking Council points out that some trading platforms, including Coinbase and Kraken, still offer reward mechanisms to specific stablecoin holders on their platforms, potentially impacting community banks' deposit and lending capacity. The organization is calling for an explicit ban in the ongoing crypto market structure legislation on which stablecoin issuers' affiliates or partners offer returns to holders. The report also mentions that the Banking Policy Institute has previously made similar requests, arguing that such practices could lead to deposit outflows from the traditional banking system. Meanwhile, crypto industry organizations such as the Crypto Council for Innovation and the Blockchain Association have voiced their opposition to the Senate, arguing that payment-type stablecoins are not intended for lending and that further tightening of regulations could stifle innovation and consumer choice. (Cointelegraph)