Tensions between the banking sector and the cryptocurrency industry over stablecoins are growing in the US.
Trade associations representing different sectors of the American banking industry have sent a letter to the Senate Banking Committee calling for significant changes to the reward and yield mechanisms included in the Tillis-Alsobrooks stablecoin agreement.
According to shared information, banking institutions argued that the current draft language would “allow for circumvention” of stablecoin reward restrictions. Banks stated that the proposed regulation would incentivize customers to increase their stablecoin balances instead of bank deposits.
The letter contained the following statements:
“The proposed language includes exceptions that would allow circumvention of the intended ban, encouraging customers to hold and grow stablecoin balances at the expense of deposits.”
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The banking sector’s letter is considered one of the strongest warnings yet against the cryptocurrency market structure bill. Industry representatives warned senators that the current consensus on stablecoin reward systems could accelerate deposit outflows from the financial system.
Meanwhile, in Washington, all eyes are on the Senate Banking Committee. It is reported that the committee could begin considering the bill concerning the structure of the cryptocurrency market as early as next week.
The recent stablecoin compromise between Republican Senator Thom Tillis and Democratic Senator Angela Alsobrooks aims to limit stablecoin issuers from offering users direct interest-like returns. However, the banking lobby believes that certain exceptions in the current text could render this ban ineffective.
*This is not investment advice.