But innovation works best when the rules are clear and the playing field is fair. That is why bankers across the country have asked Congress for a straightforward clarification: The prohibition on paying interest for holding stablecoins should apply regardless of who makes the payment. An issuer should not be able to accomplish indirectly through an affiliate or partner what it is prohibited from doing directly. During debate over the CLARITY Act, Congress’ sister bill to the GENIUS Act, proponents offered the banking industry an amendment intended to address these concerns. Under that proposal, regulators could act after five years if evidence showed that stablecoin rewards had harmed community banks. That approach gets the sequence backward. Waiting five years to determine whether harm has occurred means communities could spend five years experiencing that harm. By then, deposits could already have migrated away from local institutions, lending capacity could already have declined, and small businesses and consumers could already have faced reduced access to credit. Ultimately, the amendment was not included in the bill. The CLARITY Act subsequently failed to advance in a September procedural vote. Although many lawmakers understand the banking industry’s concerns, the legislation also raised broader issues that complicated its path forward. So where do we go from here? The GENIUS Act is already law, including its prohibition on stablecoin issuers paying interest. Meanwhile, federal regulators are moving forward with rules to implement the new framework. Treasury Secretary Scott Bessent has indicated that Treasury is proceeding with GENIUS Act rulemaking, and federal banking regulators are also working on stablecoin-related regulations. That regulatory process now represents an important opportunity. Rules governing rewards and similar incentives can help ensure that stablecoins remain what Congress intended them to be: innovative payment tools. At the same time, those rules can prevent stablecoins from becoming de facto deposit products that draw funding away from the lending system without assuming the responsibilities that come with traditional banking. There is room for both innovation and a strong banking system. We should not have to choose between faster payments and accessible community credit. As regulators release proposed rules, it will be critically important for bankers to participate in the public comment process. Policymakers need to understand what changes in deposit flows mean on the ground — not only for financial institutions, but for the customers, businesses and communities those institutions serve. The Colorado Bankers Association will continue advocating for a regulatory framework that encourages responsible payment innovation while preserving banks’ ability to meet the credit needs of their communities. Stablecoins can have an important place in the future of payments. The goal should be to make sure they strengthen our financial system rather than unintentionally weaken the community lending that helps Colorado grow. 5 Colorado Banker
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