In a fervent clash that underscores the ongoing struggle between traditional finance and the burgeoning cryptocurrency sector, the crypto industry is mounting a vigorous defense against Wall Street’s latest maneuvers. On August 19, 2025, the Crypto Council for Innovation and the Blockchain Association penned a letter to Senate Banking Committee leaders, urging them to dismiss proposals aimed at revising the newly minted U.S. stablecoin law. The heart of the matter? The industry’s fierce opposition to the American Bankers Association and other financial entities’ efforts to dismantle key parts of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
A Battle for the Future of Stablecoins
At the center of this contentious debate is Section 16(d) of the GENIUS Act, a provision that allows subsidiaries of state-chartered institutions to operate across state lines without needing separate licenses—a move seen as pivotal for stablecoin issuers. Banking groups argue that this could lead to regulatory arbitrage, allowing uninsured institutions to bypass state licensing regimes. They warn of a potential $6.6 trillion drain from the U.S. banking system due to the act’s so-called loopholes. This concern echoes themes explored in Inside Wall Street’s Stablecoin Boom, where the financial sector’s growing interest in stablecoins is examined.
However, crypto advocates are not convinced. According to a July 2025 study by Charles River Associates—cited by the crypto groups—there’s no significant evidence linking stablecoin adoption to deposit outflows from community banks. Instead, they assert that stablecoin reserves are largely held within the financial system, bolstering commercial banks and Treasury securities.
“The data simply doesn’t support the doomsday scenarios painted by the banking sector,” an industry analyst remarked, emphasizing the need for a balanced approach that ensures fair competition in financial services.
The Stakes for Consumers and Financial Inclusion
An equally pressing concern is the potential impact on consumers, particularly those underserved by traditional banks. The crypto organizations argue that banning yield programs offered by affiliates of stablecoin issuers would stifle innovation and limit options for consumers seeking better returns than the paltry 0.07% APY offered by most U.S. checking accounts.
“Eliminating these features for stablecoin users, while allowing them in the banking sector, would tilt the playing field in favor of legacy institutions,” the groups wrote. They contend that allowing affiliates to share rewards with stablecoin users is crucial for fostering competition and serving underbanked populations.
The GENIUS Act, now law, represents a significant step forward for the crypto industry. Yet, the Digital Asset Market Clarity Act—a broader regulatory framework—remains in the Senate, where its fate hangs in the balance. Republican Tim Scott, the Senate Banking chairman, anticipates the bill’s finalization by the end of September. However, he acknowledges potential pushback from Senator Elizabeth Warren and her allies, who have historically been critical of deregulating the crypto sector. For more insights into the legislative challenges facing the crypto world, see Inside Wall Street’s Stablecoin Boom.
The Path Forward: Uncertainty and Opportunity
As regulatory bodies prepare to draft implementing rules, the crypto and banking industries are poised for a showdown that could shape the future of digital assets in the United States. The outcome will hinge on the reconciliation of the Senate’s version of the stablecoin provisions with the House’s Digital Asset Market Clarity Act.
For crypto enthusiasts, the stakes couldn’t be higher. The current landscape offers opportunities to redefine financial inclusion and democratize access to wealth-building tools. Yet, the looming threat of regulatory rollback raises questions about whether these gains can be preserved.
As the legislative process unfolds, both sides will continue to lobby for their interests, each hoping to influence the final shape of the law. Amidst this dynamic tug-of-war, one thing is certain: the future of crypto regulation in the U.S. is anything but settled. And for those watching from the sidelines, the coming months promise to be anything but dull.
Source
This article is based on: Crypto Lobby Pushes Back Against Bank Effort to Rewrite U.S. Stablecoin Law
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
