The GENIUS Act Could Trigger a $6.6 Trillion Shift from U.S. Banks
Potential Impact of the GENIUS Act
The recently enacted GENIUS Act of 2025 has stirred controversy among major financial institutions, with concerns that it could siphon off $6.6 trillion from the U.S. banking system. The Bank Policy Institute (BPI) and other banking entities have issued a letter to Congress highlighting a loophole that enables crypto exchanges to function as high-yield shadow banks.
Unfolding Concerns
The act prohibits stablecoin issuers from offering interest, yet banks indicate that related companies bypass this by providing returns surpassing traditional savings accounts. This has raised alarms about a potential shift in how Americans manage their finances. Should stablecoins evolve into high-interest investments, BPI cautions it could lead to deposit migration, impacting bank liquidity and access to credit for consumers and businesses.
Ongoing Debates
During legislative discussions in July 2025, Rep. Marjorie Taylor Greene voiced opposition to the act, citing concerns over the introduction of a central bank digital currency (CBDC). She stated her support for crypto but opposed any measure that limits personal financial autonomy. Despite these concerns, loopholes remain unresolved.
Market Dynamics and Future Outlook
The stablecoin market continues to expand, with a market cap reaching $317.8 billion, led by Tether (USDT) and Circle's USDC. If Congress curbs the ability of exchanges to offer interest, stablecoins might revert to mere payment tools, potentially altering their current appeal. This regulatory scrutiny marks a pivotal moment for the crypto shadow banking sector. The critical question remains: will the $317 billion currently invested in stablecoins persist if interest incentives are removed?
Conclusion
- The stablecoin regulation loophole has escalated into a systemic risk that demands attention from regulators.
- With substantial funds already in stablecoins, legislative action is crucial to address the loophole or risk sustaining the crypto shadow banking framework.