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Repair Windows errors before they cause bigger problemsFix Now →Scan for outdated or missing drivers - takes under a minuteDriver Scan →Clear out junk files and repair common Windows errorsFree Scan →The GENIUS Act bars payment stablecoin issuers from paying interest, but the disputed question is whether crypto exchanges may still offer rewards tied to stablecoin balances. Banks warn that those rewards could draw money away from deposits used to fund lending; crypto advocates say they are competition for consumers. Neither predicted outcome is established as a result of the law.
What the GENIUS Act prohibits—and what remains contested
The distinction is between the stablecoin issuer and a platform that distributes or holds the coin. Under the GENIUS Act’s issuer-focused restriction as described in WIRED’s September 3, 2025 report, payment stablecoin issuers may not pay interest. Exchanges, however, could offer rewards linked to customers’ stablecoin holdings. Whether such arrangements cross the law’s boundary is the contested issue; the existence of a reward does not by itself establish that it is legally interest.
A stablecoin is a digital token designed to maintain a stable value, commonly relative to the U.S. dollar. An exchange reward is a separate offer associated with holding or using the token on a platform. That distinction matters: a prohibition directed at issuers does not automatically settle how a third-party exchange’s program should be treated.
Why banks and crypto advocates disagree
Banks’ concern: deposit funding
Banks argue that rewards could make stablecoin balances more attractive than bank deposits and encourage customers to move funds onto crypto platforms. If enough deposit funding left banks, they say, the change could affect a funding source used to support lending. This is a concern about a possible chain of effects, not proof that rewards have already caused a broad deposit flight or reduced lending.
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Crypto advocates’ argument: competition
Crypto-industry advocates frame rewards as competition for consumer funds and argue that banks could respond by offering more attractive deposit rates. That is also a prediction, not an established market outcome. Circle deputy general counsel of global policy Corey Then told WIRED that stablecoins are a different kind of instrument: “digital cash, a digital dollar, not a security instrument that provides a return.” Digital Chamber CEO Cody Carbone argued that raising concerns about rewards after the GENIUS debate “overlooks the extensive debate that shaped the GENIUS Act.” These are industry positions, not authoritative legal determinations.
What the headline-scale estimates do—and do not—show
The figures cited in the debate are projections with different sources and meanings. They are not measurements of money that has already moved from banks into stablecoins.
| Figure | Source and meaning | How to read it |
|---|---|---|
| $6.6 trillion | A 2025 U.S. Treasury estimate, described by WIRED as the amount consumers might move from bank deposits to stablecoins. | A scenario estimate associated in the reporting partly with GENIUS, dependent on adoption and market assumptions—not observed migration. |
| 6.1 percent | A maximum decrease in banks’ deposits predicted by a Coinbase-commissioned study, as reported by WIRED in 2025. | The study’s community-bank analysis found no statistically significant effect under the stablecoin-growth projections it considered likelier. This is a separate analysis from Treasury’s estimate, not a corroborating measurement. |
Patrick McHenry, a former U.S. representative and former chair of the House Financial Services Committee who was Ondo’s vice-chair at the time WIRED reported his remarks, called the dispute “highly fraught territory that banks have jealously guarded.” The stakes explain the intensity of the arguments, but the large figures should not be read as forecasts with guaranteed outcomes.
How stablecoin holdings differ from bank deposits
A stablecoin balance is not an FDIC-insured bank deposit. A token designed to track the dollar can also trade above or below one dollar, so “stable” does not guarantee continuous trading at exactly par. Consumers should distinguish a platform’s advertised reward from the protections and terms attached to a bank account.
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A July 11, 2025 BIS Bulletin noted that stablecoin links with traditional finance are growing and raised concerns including financial integrity, financial stability, and monetary sovereignty. The bulletin explicitly states that its views are those of its authors and do not necessarily represent the BIS or its member central banks.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Where legislation and rulemaking stand
The legislative picture has moved on from the September 2025 expectation that a Senate CLARITY Act version would arrive that month. The Associated Press reported that on September 15, 2026, the Senate failed to advance the bill in a 49–50 procedural vote. That vote left the CLARITY Act stalled at that stage; it did not resolve the stablecoin-rewards dispute.
Separately, Treasury’s September 30, 2026 proposed rule showed GENIUS implementation continuing. Its comment deadline was October 19, 2026, which was still in the future at the time of this reporting. Rulemaking may further define implementation, but the existence of a proposed rule should not be mistaken for a final resolution of every question about exchange rewards.
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What consumers should take from the dispute
- Check who is making the offer: a stablecoin issuer and an exchange are different parties, and the legal question in this dispute concerns that boundary.
- Do not treat a reward rate as equivalent to bank-account interest or deposit insurance. Review the platform’s terms and the risks of holding a token and using an exchange.
- Read deposit-outflow numbers as estimates, not evidence that the projected movement has happened.
- Distinguish enacted restrictions from proposed implementation rules and from separate legislation that has not advanced.
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