The American Bankers Association (ABA) and a coalition of state banking associations have urged federal regulators to maintain the GENIUS Act’s prohibition on interest-bearing stablecoins, arguing that allowing yield-linked tokens would blur the line between regulated deposits and unsecured digital assets. The groups submitted a joint letter this week to the U.S. Treasury Department and the Office of the Comptroller of the Currency (OCC) as part of the ongoing rule-drafting process for the legislation.
The letter stated that offering interest on stablecoins would introduce systemic risk by creating unregulated deposit-like products outside the insured banking framework. According to the ABA, interest-bearing tokens could draw funds away from traditional banks without meeting the capital and liquidity requirements that apply to federally chartered institutions. The associations warned that such a development might also undermine monetary policy transmission and increase liquidity volatility during periods of market stress.
The GENIUS Act, currently under review by the Treasury and Congressional committees, aims to establish a comprehensive regulatory regime for stablecoin issuers in the United States. It prohibits the issuance of tokens that promise interest or dividends to holders while setting reserve, audit, and disclosure standards for asset-backed stablecoins. The ABA’s submission supports those provisions and encourages strict oversight to ensure parity with deposit insurance standards administered by the Federal Deposit Insurance Corporation (FDIC).
Industry observers say the bank lobby’s position reflects concern that loosely regulated stablecoins offering returns could function as shadow banking products. Analysts note that the GENIUS Act’s ban on interest payments aligns with similar rules in the European Union’s MiCA framework and Singapore’s Payment Services Act, both of which restrict yield offerings to protect consumers and maintain currency stability. The ABA argues that a consistent global standard will help reduce regulatory arbitrage and protect U.S. financial integrity.
The letter also emphasized support for open technology innovation within a defined regulatory boundary. While acknowledging the potential efficiency gains from tokenized settlement, the bank groups insisted that any stablecoin intended for payments must operate under bank-level prudential standards. They called on the Treasury to reject proposals from non-bank issuers that seek to circumvent capital rules through offshore structures or decentralized governance mechanisms.
The Treasury Department is expected to complete its review of stakeholder submissions early next year, after which formal rulemaking will proceed. The final regulations will determine whether interest-linked stablecoins can enter the U.S. market and how token issuers must comply with bank-equivalent liquidity and transparency requirements to maintain investor protection and system stability.
