Crypto Lobbying Groups Oppose Wall Street's Efforts to Amend Stablecoin Law - Crypto Economy

TL;DR

• Crypto industry organizations are resisting Wall Street attempts to modify the GENIUS Act, warning that repealing Section 16(d) would favor traditional banks.
• They highlight that stablecoin reserves strengthen the financial system and enable fair competition, especially for underbanked consumers.
• Legislative changes are possible before regulators implement the law, making the current lobbying efforts critical to preserving stablecoin user protections and nationwide redemption rights.

Crypto advocacy groups are actively pushing back against Wall Street’s efforts to reshape the United States’ new stablecoin legislation. Industry leaders warn that removing key provisions of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act would skew the market in favor of established banks.


In a letter sent to Senate Banking Committee leaders on August 19, the Crypto Council for Innovation and the Blockchain Association urged lawmakers to reject proposals from the American Bankers Association, Bank Policy Institute, and state banking organizations. These groups are advocating for the removal of Section 16(d) and the prohibition of yield programs offered by affiliates of stablecoin issuers.

Section 16(d) permits subsidiaries of state-chartered institutions to conduct money transmission across state lines, allowing stablecoin holders to redeem tokens nationwide without obtaining separate state licenses. Banking associations argue this could lead to regulatory arbitrage and claim that interest programs run by affiliates might divert up to $6.6 trillion in deposits from U.S. banks.

Stablecoin Reserves Continue Supporting Financial Stability

Crypto groups counter these claims, citing a July 2025 study by Charles River Associates that found no significant correlation between stablecoin adoption and community bank deposit outflows. They emphasize that most stablecoin reserves remain in commercial banks and Treasury securities, continuing to support lending and financial stability.

The advocacy groups also stress that allowing affiliates to share rewards with stablecoin users ensures fair competition, particularly for underbanked populations who have limited access to traditional banking services. With U.S. checking accounts averaging just 0.07% APY, far below inflation and Federal Reserve rates of 4.25%-4.50%, these programs provide a meaningful alternative for everyday consumers.


Legislative Battles Could Shape Future Stablecoin Rules

While the GENIUS Act is officially law, the broader Digital Asset Market Clarity Act, currently under Senate consideration, could modify stablecoin regulations before implementation. Crypto groups are lobbying to preserve existing protections, while bankers are using the legislative process to advance their agenda. Senate Banking Chairman Tim Scott expects the bill to finalize by September, although opposition from some Democrats could influence its outcome.