The Blockchain Association led a broad industry push this week, asking Senate Banking leaders to oppose efforts that would expand the ban on stablecoin profitability beyond what Congress has written into law.

According to the association, letter was signed by more than 125 cryptocurrency and fintech groups and companies and was sent to lawmakers to warn against reinterpreting the modern rules in a way that would prevent exchanges and apps from offering rewards tied to their stablecoin holdings.

Preserving the ability of platforms to offer rewards

The coalition’s argument is based on the text of the so-called GENIUS Actwhich was signed into law earlier this year by US President Donald Trump and expressly prohibits stablecoin issuers from paying interest or profits directly to holders.

Reports show that the statute nonetheless leaves third-party platforms free to provide incentives, which industry groups say is intentional and significant to competition.

The letter pushes back against attempts to bar crypto platforms from offering yield to customers. Source: The Blockchain Association

Banks call for closing the legal loophole

Banking groups pushed back strongly. A coalition led by the American Bankers Association and other banking industry groups has asked Congress to clarify that the ban should cover partners and affiliates, arguing that rewards offered by third parties could circumvent the law and siphon deposits from customary banks.

According to recent reports, Treasury analyzes cited by bank supporters estimate this stablecoins in some scenarios it could draw down more than $6 trillion from bank deposits – an amount that has become central to banks’ arguments for tighter regulations.

What industry leaders say

Industry advocates say extending the ban would weaken modern stablecoin services and shift the market toward larger, incumbent financial firms that already control many payment rails.

Based on reports Blockchain Association and partner groups say changing the interpretation of the law now would reopen negotiations. The GENIUS Act has been terminated and would create regulatory confusion before agencies finish writing implementing regulations.

Competition and consumer choice are at stake

Supporters of stronger limits say the goal is to protect consumers – to prevent stablecoin arrangements from becoming de facto interest accounts that could weaken the banking system and reduce lending to households and businesses.

Other observers point out that the issue could also affect which companies win in the future in payments, as restrictions on rewards will affect the commercial incentives of exchanges and fintechs.

Next steps in Washington

The Senate banking staff is considering letters from both sides as they weigh potential amendments or clarify language in upcoming hearings.

Regulators who must implement the GENIUS Act have been urged to issue rules to prevent circumvention of the ban, and lawmakers may face pressure to either leave the law unchanged or make minor changes to address banks’ concerns.

Featured image from Unsplash, chart from TradingView

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