Community banks are urging U.S. senators to tighten oversight of yield-based stablecoin workarounds. More than 200 bank leaders express concern over companies skirting the GENIUS Act’s ban on stablecoin interest payments. A U.S. Treasury report warns up to $6.6 trillion in deposits could be at risk without legislative clarity.

The American Bankers Association calls on Congress to clarify that the interest prohibition applies to stablecoin issuers’ affiliates and partners. The banking industry has been sounding alarms since the passage of the GENIUS Act last July, with concerns that the restriction can be easily bypassed, threatening credit availability nationwide.

Jonathan Gould, head of the Office of the Comptroller of the Currency, downplays concerns of a stablecoin bank run, stating any material deposit flight would not go unnoticed. Saravanan Pandian of KoinBX and Nitesh Mishra of ChaiDEX offer perspectives on the need for clear definitions between interest and rewards, as well as robust regulations to ensure fair competition between banks and stablecoin firms.

CoinGecko data shows the stablecoin market at over $312 billion, with predictions indicating a 3% chance of breaking the $360 billion barrier by February. The push for regulatory clarity on stablecoin laws highlights the need for cooperation and innovation between banks and crypto platforms.

Read more at Yahoo Finance: US Bankers Warn Stablecoin Yield Workarounds Threaten Local Lending