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A broad coalition of national financial trade organizations urged the U.S. Senate to block legislation that would allow interest-bearing stablecoins, warning that such a move could undermine community banks, credit unions and the local economies they support.
In a joint letter sent to Senate leaders this week, the leaders of organizations representing banks, credit unions and community development lenders cautioned that permitting stablecoin issuers to pay interest would create a powerful incentive for consumers and businesses to move funds out of insured deposits and into largely unregulated digital products.
The letter argued that deposits held at community banks and credit unions are not idle funds, but the backbone of local lending. Each dollar deposited can support mortgages, small business loans, agricultural financing and consumer credit. Allowing stablecoins to compete directly with deposits by offering interest, the groups said, would siphon liquidity away from regulated institutions that are required to reinvest in their communities.
Treasury Department estimates cited in the letter indicated that up to $6.6 trillion in bank deposits could be at risk if interest-bearing stablecoins are widely adopted, a shift that would disproportionately affect community-based financial institutions and Community Development Financial Institutions (CDFIs).
The organizations also warned that stablecoins lack the consumer protections tied to insured deposits, including federal deposit insurance and robust regulatory oversight. They urged lawmakers to clearly codify in statute that stablecoins are payment instruments, not investment or deposit substitutes, and to prohibit interest payments or similar inducements.
Signatories to the letter included the American Bankers Association, America’s Credit Unions, the Defense Credit Union Council, the Independent Community Bankers of America, the National Bankers Association, Inclusiv and the Association of Military Banks of America.
The groups concluded that failing to close the loophole could weaken the nation’s community finance system, reduce access to credit, and destabilize the local financial infrastructure that supports households and small businesses nationwide.
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