Hey all, Liam here!

With summer finally coming to an end, Congress is back in Washington this week. 

And if banking lobbyists have their way, lawmakers will take a second look at the Genius Act. 

Yes, that stablecoin legislation that Trump signed into law in July. 

A slew of lobbying groups backing banks are looking to relitigate at least two key features of Genius. 

First, they want to close what they refer to as a loophole that lets crypto companies offer yield on stablecoins. Crucial provisions that would’ve allowed issuers from doling out lucrative yields to holders were eventually struck from the legislation. 

But that’s not stopping Coinbase and PayPal from moving forward, albeit issuing “rewards” rather than yield. 

But how?

“First, we are not the issuer. And second, we don’t pay interest in yield, we pay rewards,” Brian Armstrong, Coinbase CEO, said during the company’s latest earnings call in July. “So, long story short, we plan to continue to pay rewards to our customers, which are very competitive.”

Competitive indeed. Rates for stablecoin rewards can be as high as 5%. American banks typically don't offer interest rates as high as those earned with stablecoins.

An April report by the US Treasury predicted that yield-bearing stablecoins will attract some $6.6 trillion in deposits from banks. 

If that happened, it would undermine the lending market for consumer households, argued the Bank Policy Institute in August, an advocacy group for some of the world's largest banks. 

After that, a coalition of bank industry trade associations led by the American Bankers Association sent a letter urging lawmakers to strike a key section of the Genius act.

Section 16(d) allows uninsured depository institutions with stablecoin businesses to custody funds and operate a money transmission business nationwide with much less state oversight. Essentially,

Crypto lobbying groups and other experts clapped back pretty quickly. 

“This was no loophole and you know it,” Paul Grewal, Coinbase’s chief legal officer, said on X, responding to the BPI’s concerns over interest-bearing stablecoins. “It’s time to move on.”

Moving on may indeed be the only option as US lawmakers are looking at a whole host of other issues to contend with, including conducting an investigation into former president Joe Biden’s mental state while he was in office and issuing new sanctions on Russia. 

Other representatives, such as Democrat Ro Khanna of California and Republican Thomas Massie of Kentucky, are still pushing the House to force the Department of Justice to release more information into the late Jeffrey Epstein. 

Oh, and not to mention a potential government shutdown on September 30.

ICYMI

• End in sight for Czech government’s $45m Bitcoin snafu as lawyer offers ‘extremely favourable terms’

  After the Czech Justice Minister Pavel Blažek accepted a donation of 468 Bitcoin on behalf of the government from a convicted embezzler, the national government was faced with an unusual question: How to sell that Bitcoin for cash?

• Crypto industry calls for new bill to protect DeFi devs following Tornado Cash founder conviction
  More than 110 crypto firms, builders, investors, and others signed a document that would provide key protections to developers in the US. The hope is that such protections will find themselves included in upcoming market structure legislation later this year.

• Can the stablecoin gold rush shore up the $35tn American debt crisis? ‘It doesn’t hurt!’
  Shoring up more than $35 trillion in government debt is a serious ask for stablecoin issuers. But that’s what US Treasury Secretary Scott Bessent is banking on — at least in part.

Story of the Week

UK falling behind on crypto laws to push consumers to unregulated offshore providers, warns MP

A crypto lobbying group in the UK is reviving to urge lawmakers to erect clear rules of the road. It’s much of the same playbook at the enthusiasts have pushed in Europe and the US. Without clear rules, the co-chairs of a parliamentary group argue, British consumers will be forced to go offshore.

Post of the Week

If features of landmark stablecoin legislation are back under consideration, issuers haven’t stepped on the brakes. Last week, the total number of dollar-pegged cryptocurrencies on the market reached a record high of over $283 billion.

Experts suggest that figure will soar past $2 trillion by the end of the decade.

DL News is an independent news organisation that provides original, in-depth reporting on the largely misunderstood world of cryptocurrency and decentralised finance. From original stories to investigations, our journalism is accurate, honest and responsible.

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