Our bank is Strengthening efforts To prevent Stablecoin issuers from earning returns, they warn lawmakers that they will drain deposits and make loans unstable by allowing compensation.
However, Stablecoin supporters say that the campaign is not about protecting financial stability; Protects $187 billion in annual profits An engine derived from banks’ payment processing fees.
The fight is currently unfolding in the parliamentary corridor between lobbyists on both sides of the issue, highlighting the interests of stablecoins as a transition from niche crypto instruments to mainstream payment rails.
At the heart of the controversy is whether issuers who support dollar deposits should be allowed to support stove coins, or whether such activities should remain the exclusive territory of traditional banks.
Bank lobby puts pressure on Congress to ban the Stablecoin Regle program
In an August letter to top members of the Senate Banking Committee, more than 40 state banking associations joined the American Banking Association Calling for Congress It will strengthen the prohibition on paying interest included in the newly enacted genius law.
“The association supports the ban on genius laws against issuers of payment stables. “However, this limit is easily circumvented when the exchange or other affiliates provide yields or compensation.”
The bankers urged Congress to expand the ban covering Stablecoin issuers exchanges, brokers, dealers and affiliates. They argue that if Stablecoins holds yields, customers will migrate deposits from banks to digital assets, eroding the bases that banks use to expand their credit.
“Banks drive the economy by turning deposits into loans,” the letter said. “Credit creation is painful when sediments flow into stubcoins chasing harvest.”
Stablecoins Spotlight Bank’s profits come from $18.7 billion in payment fees
Stablecoin argues that the threat of so-called “seedling erosion” is exaggerated. Coinbase, one of the largest digital assets companies in the United States, calls the story a “myth.”
Coinbase Chief Insurance Officer, Written by Fariyard Sirzad September 16, 2025. “If banks are really deposit-hungry, they’ll compete actively for higher interest rate funds. Instead, they now park $3.3T as the reserves of the Federal Reserve and account for almost 20% of all bank deposits, rather than extending more loans. And while holding reserves is not a bad idea, banks hold more than they need to be with the Fed,” he said. “This is not about economics, it’s about controlling the story and protecting profit margins from competition.”
Coinbase claims “it will not undermine the lending”
September 2025, Coinbase Institute has published an analysis of Stablecoinsnote that tokens such as Tether’s USDT and Circle’s USDC are primarily used as cross-border payments, on-chain finance, value stores, and efficient domestic payment systems.
“Stubcoin will not weaken lending, it will expand the financial ecosystem and reinforce the dollar,” the report said. “As permitted by recent Stablecoin law, they provide an opportunity to modernize the domestic payment system by releasing consumers from hidden subsidies embedded in the natural benefits of swiping fees and low-Yield checking accounts.”
Bank resistance to Stablecoins reflects the fear of ATMs and online banking
August 2025, Federal Reserve Governor Christopher Waller framed stubcoins and ciphers as part of a century-long payment storycompares the rise with early innovations like credit cards. Just as banks once resisted clearing ATMs, online banking and electronic checks, skepticism about digital money reflects a familiar pattern of existing people pushing back before they finally adopt new technologies.
Waller emphasized that private sector innovation combined with public infrastructure is constantly driving payment progress. He argued that Stablecoins could extend the dollar’s global role and improve cross-border payments, similar to the credit cards that Commerce transformed decades ago. AI will also be taking part in this revolution and automating surveillance and compliance. For policymakers and consumers. Resistance to change is part of the cycle, but digital assets are the basis of the global economy.
Congress faces intersections on stubcoin regulations under the Genius Act
Congress is facing the choice between seizing existing banking models or promoting the competition for payments. Genius Law signed into law in July 2025the first US federal law to establish a framework for stubcoin, requiring a one-to-one backing of monthly reserve disclosures with the Dollar or Treasury. It also banned the issuer from paying the yield directly directly to the owner of Stablecoins.
However, the law left room for exchanges and affiliates to provide compensation programs that banks now want to close. It remains unclear whether lawmakers will move to limit these programs.
Canada is moving forward with Stablecoin as the US continues debate
The Canadian businesses, north of the border, are moving forward with plans to launch a regulated Canadian dollar stubcoin. Earlier this month, Tetra Digital Group announces $10 million investments from leading fintechs and financial institutions Includes Wealthsimple, National Bank of Canada, ATB Financial and Shopify to issue fully regulated tokens in 2026.
“By bringing together many of Canada’s most trusted institutions, we are not just starting something stable. We support our country’s solutions and maintain economic sovereignty,” said Didier Lavallée, CEO of Tetra.
In an interview, Lavallee was asked about Canadian Dollar, a CAD-supported stubcoin that competes with USD-backed tokens. Lavallee said: “We believe there is room for other stubcoins that are not USD in the market. CAD is around 6% of the global Forex market, so we believe there is a market for CAD Stablecoin.
This effort highlights the ways countries outside the US are taking advantage of stable opportunities.
Stablecoin Innovation puts pressure on banks as consumers demand more
Banks’ efforts to block Stablecoin yields could delay adoption, but technology continues to advance.
Stablecoin Rails offers immediate payments, lower banking costs for correspondents, allowing for a 24/7 money move.
For consumers, the outcome of the discussion can shape the cost and convenience of everyday transactions.
The survey shows widespread dissatisfaction with traditional banks. a A 2024 Pew survey found that over half of Americans viewed banks at a disadvantage. Expanding the range of payment options for households and businesses can drive competition and reduce costs across the financial system.
The future of money is lined up
The battle for Stablecoin captures the broad struggle for the future of finances. While banks aim to maintain their traditional role as depositors and lenders, Stablecoin issuers seek recognition as legitimate payment providers.
What happens next determines whether the US doubles its legacy model or accepts new rails that promise efficiency and competition. The answers ripple far beyond Wall Street, shaping the way households and businesses manage their finances in an increasingly digital world.
