ABA, 52 State Banking Associations Urge Treasury to Uphold GENIUS Act’s Ban on Stablecoin Interest

The American Bankers Association joined 52 state bankers associations from across the country in submitting a letter to the U.S. Department of the Treasury today urging strong implementation of the GENIUS Act's prohibition on interest for payment stablecoins. The letter, which responds to Treasury's advance notice of proposed rulemaking regarding implementation of the GENIUS Act, emphasizes the need to preserve the law's core intent: ensuring stablecoins serve as payment tools, not investment vehicles.

"The GENIUS Act's prohibition on a payment stablecoin issuer paying interest or yield on payment stablecoins reflects Congress's intent for payment stablecoins to be used for transactions and not as investment vehicles," the associations wrote. "Treasury must reinforce this intent."

The associations warn that without a broad interpretation of the interest ban, digital asset platforms may exploit loopholes to offer high-yield rewards and other incentives, undermining the law's purpose and threatening the traditional banking system. The letter cites recent comments from Senator Mike Rounds, who said: "This looks to me like it's an end-run on the original legislation."

Community banks, which play a vital role in rural and underserved areas, are particularly vulnerable to deposit outflows caused by interest-bearing stablecoins. The letter highlights that such disintermediation could result in a 25.9% loss in deposits, eliminating approximately $1.5 trillion in lending capacity and shrinking small business and farm credit by $110 billion and $62 billion, respectively.

To ensure effective enforcement, the associations call on Treasury to:

• Define "interest or yield" broadly, including any economic benefit regardless of its label.
• Prevent evasion through affiliates or partners, treating indirect payments as issuer payments.
• Avoid narrow interpretations of "solely," ensuring that any benefit tied to holding a stablecoin triggers the prohibition.

"The digital assets landscape is evolving rapidly, and thoughtful, balanced rulemaking is needed to ensure it develops in a way that supports-not disrupts-the broader financial system," the groups said.

Read the full letter.

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About the American Bankers Association

The American Bankers Association is the voice of the nation's $25 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $19.7 trillion in deposits and extend $13.1 trillion in loans.