ICBA urges senators to prohibit payment of interest on stablecoins by all digital market participants

ICBA and its 44 affiliated state partner associations urged senators to ensure proposed legislation to create a regulatory framework for digital assets markets does not impair community banks' ability to utilize deposits to fuel their communities.

Details: ICBA and its state affiliates sent a letter to Senate Banking Committee leaders asking them to ensure the Responsible Financial Innovation Act explicitly prohibits digital assets market participants from payment of interest or yield to holders of stablecoins, saying the stakes are too high for the borrowers and communities served by community banks.

Background: The GENIUS Act stablecoin law prohibited payment stablecoin issuers from paying yield or interest directly to stablecoin holders, though this prohibition can be evaded by marketing the interest as “rewards” to stablecoin holders and having payments come from affiliates, exchanges, and other third parties instead of directly by the stablecoin issuer.

Grassroots Campaign: ICBA is calling on community bankers to urge their senators to ensure proposed crypto market structure legislation bars all digital assets market participants from offering yield, interest, or rewards on payment stablecoins. Community bankers can use a customizable message on ICBA’s Be Heard grassroots action center to tell their senators to minimize risks to the banking system and local economies by extending the prohibition to crypto exchanges and other third parties.

Resources for Community Bankers: As the congressional debate over digital assets policy continues, ICBA offers:

• A summary of the GENIUS Act for community bankers that includes insights on the regulatory framework for payment stablecoins, policies on bank issuance, and more.

• An on-demand community banker briefing on the GENIUS Act and other digital asset policy developments.