A civil war erupts in the US stablecoin market: banks block returns, crypto industry retaliates.

A civil war surrounding stablecoins is unfolding in the United States. Recently, a direct disagreement has emerged in US legislative discussions regarding whether the yield mechanism should be further blocked. Traditional banks are attempting to close the "yield loophole" of stablecoins by amending the GENIUS Act; while the crypto industry denounces this as "stifling innovation," even warning that it could become a "national security trap." When the disagreement manifests itself in the form of "legislative amendments," the debate has transcended the realm of commercial competition, directly touching upon regulatory characterization, institutional boundaries, and the competitive position of the US dollar in the digital age.

Banks "Drain the Water"

Under the current GENIUS Act, stablecoin issuers are explicitly prohibited from directly paying interest to holders to avoid direct competition with bank deposits. However, the problem lies in the fact that some trading platforms and third-party institutions still allow stablecoin holders to indirectly obtain benefits through rewards, cashback, points, etc.

The US community banking system believes that this constitutes a "circumvention" of the original legislative intent.

Recently, the Community Banking Council of the American Bankers Association (ABA) wrote to the Senate stating that some stablecoin issuers indirectly provide benefits to users holding coins through third parties such as digital asset exchanges, weakening the prohibition on interest payments for stablecoins in the bill.

The core concern is that if stablecoins, operating "without bank regulation," possess deposit-like yield characteristics, it could accelerate the outflow of funds from the banking system, weakening the deposit and lending capabilities of small and medium-sized banks. The crypto industry's backlash: However, the crypto industry believes that such changes go beyond the scope of risk control. Pro-crypto lawyer John Deaton bluntly stated that further tightening of rules, following the direction of banking lobbying, could constitute a "national security trap." He stated that banning stablecoin yield mechanisms may not protect the banking system but could instead weaken the competitiveness of the US dollar in the global digital payment system. The logic is clear and straightforward—when dollar-denominated stablecoins cannot provide holders with reasonable economic incentives, funds and demand may shift to other countries' digital currency systems. The Blockchain Association, a crypto industry organization, also pointed out that there is currently no evidence that the development of stablecoins is substantially undermining the banking system, and that amending the legislation to "completely block" it is more like an ex-post competitive intervention within an existing bipartisan consensus. The Definitive Dispute: At a deeper level, this disagreement actually points to an issue that has not yet been fully clarified by legislation—what kind of financial instrument should stablecoins be considered? The banking system tends to view them as deposit-like or payment instruments, thus requiring them to follow regulatory logic similar to traditional banks; while some in the crypto industry explicitly oppose this analogy. Alexander Grieve, Vice President of Government Affairs at Paradigm, pointed out that comparing stablecoins to credit cards is a misalignment of regulatory thinking. Stablecoins do not rely on transaction fees to create value; their economic foundation lies in the continuous returns generated by reserve assets during the holding period. If rewards are only distributed to users upon transaction, the actual effect is equivalent to imposing a hidden cost on "holding stablecoins," causing the value generated by reserve assets to be retained by intermediaries. Under this design, stablecoins will be forced to lose their core economic appeal. Imbalance at the Equilibrium Point On the surface, this is a technical debate about "return mechanisms"; but at a deeper level, it touches upon a more practical issue: In the era of digital currencies, will the United States allow the dollar to participate in global competition in a new form? The GENIUS Act originally attempted to find a balance between "financial stability" and "technological innovation." Now, this balance is being re-evaluated. The ultimate outcome remains uncertain; however, one thing is certain—the future of stablecoins is becoming a long-term struggle over institutional boundaries and the financial landscape.