US banking groups are pressing regulators to slow parts of the federal rollout of the GENIUS Act, opening a new front in their broader fight over how far stablecoins should be allowed to move into territory long dominated by bank deposits.
On April 22, the American Bankers Association (ABA) and three other banking trade groups asked the Treasury Department and the Federal Deposit Insurance Corp. to delay the public comment deadlines for three proposed rules implementing the GENIUS Act.
The associations requested that the agencies wait until 60 days after the Office of the Comptroller of the Currency (OCC) finalizes its own regulatory framework.
This procedural request could push the activation of the federal stablecoin law back by several months.
Notably, the move arrives just as traditional banks are actively pressing Senate lawmakers to tighten limits on stablecoin rewards in the broader Digital Asset Market Clarity Act, or CLARITY, signaling a coordinated, dual-front effort to constrain the digital asset sector.
At the core of both conflicts is a fundamental economic stake: Commercial lenders want stablecoins confined strictly to serving as payment rails.
They view allowing stablecoins to function as yield-bearing cash alternatives as a structural threat that could siphon capital from traditional deposits, severely disrupting the deposit-funded lending models that underpin the US credit system.
Why the Banks are seeking more time on GENIUS rules
The GENIUS Act, signed into law last year, established a baseline for stablecoin issuance but requires finalized administrative rules to take effect.
The OCC serves as the primary regulator for nonbank stablecoin issuers under the law and has proposed a foundational framework that remains pending.
The banking associations are arguing that three overlapping federal proposals are “substantively tethered” to the OCC’s primary rule.
These include a Treasury Department rule evaluating whether a state’s regulatory regime is equivalent to the federal standard; an FDIC rule outlining requirements for agency-regulated issuers and banks; and a joint directive from the Financial Crimes Enforcement Network (FINCEN) and the Office of Foreign Assets Control (OFAC) covering anti-money-laundering and sanctions compliance.
In their communication to the agencies, the banking groups contended that a fragmented comment process with staggered deadlines across interdependent proposals would undermine the goal of regulatory consistency.
They argued that public feedback would be more comprehensive if stakeholders could evaluate all the proposed rules against a finalized OCC framework.
However, the practical effect of granting this extension would be a substantial delay. Under the statute, the GENIUS Act takes effect 120 days after final regulations are issued, or 18 months after enactment.
By tethering the Treasury and FDIC timelines to the OCC’s delayed schedule, the banking sector is effectively attempting to slow the deployment of regulated, nonbank stablecoin infrastructure.
The fight over stablecoin rewards is stalling another crypto bill
While the commercial lending sector seeks to slow the regulatory rollout of the GENIUS Act, it is also engaged in a fierce lobbying effort to alter the CLARITY Act.
The banking industry is aggressively contesting provisions that would permit third-party platforms to offer yields on stablecoins. Essentially, this escalates what might appear to be a technical dispute into a battle over the future of interest-bearing cash substitutes.
The GENIUS Act expressly forbade stablecoin issuers from paying interest directly to holders.
However, it left a pathway for secondary arrangements where trading platforms and other third-party platforms could pay rewards for holding stablecoins on their platforms. The banking industry is advocating for a total ban on such incentives.
As a result, the ABA has launched an intensive public relations campaign, including premium advertising in Washington publications, to eliminate this perceived loophole.
The messaging warns lawmakers that allowing stablecoins to generate yield poses a direct threat to the viability of local community lending markets.
Those arguments recently encountered opposition from federal economists. A 21-page analysis published by the White House Council of Economic Advisers concluded that implementing a comprehensive ban on stablecoin rewards would increase traditional bank lending by just $2.1 billion, representing a negligible 0.02% of outstanding loans.
The CEA report also estimated that a full yield ban would cost consumers approximately $800 million.
This data has significantly weakened the banking industry’s central argument that unrestricted stablecoin yield represents a structural vulnerability for the traditional banking system.
However, ABA answered that the White House was measuring the wrong problem. In its view, the analysis focused on today’s roughly $300 billion stablecoin market instead of modeling a future in which reward-bearing stablecoins scale up and compete more directly with the nation’s much larger deposit base.
That difference in framing is central to the political fight. Crypto firms are arguing over present utility, while banks are arguing over future displacement.
What is holding up the CLARITY Act?
The dispute over yield has become the primary bottleneck stalling the CLARITY Act’s progression through the Senate Banking Committee.
The legislation aims to establish comprehensive jurisdictional boundaries between federal market regulators and create a pathway for digital assets to be treated as non-securities once their networks are sufficiently decentralized.
Negotiations to resolve the stablecoin dispute remain fluid. Sens. Thom Tillis and Angela Alsobrooks have reportedly reached an agreement in principle that would prohibit yield paid solely for holding a stablecoin while allowing narrowly defined, activity-based rewards tied to payments and platform usage.
However, the final text of that compromise has yet to be publicly released, effectively freezing the legislative process. Tillis recently indicated that the committee should delay scheduling any markup sessions into May, a move that introduces severe timing constraints for the bill.
While the stablecoin rewards issue is the most visible hurdle, lawmakers are also quietly navigating a handful of other unresolved disputes, including exemptions for noncustodial developers and limits on the SEC’s relief authority.
With the Senate floor calendar increasingly congested by an election year, the markup delay into May significantly heightens the risk that the CLARITY Act will run out of legislative time before the end of the session.
Notably, US lawmaker Senator Cynthia Lummis has warned that the legislation could be delayed till 2030 if it is not passed this year. Meanwhile, crypto bettors on Polymarket believe there is less than 50% chance of the bill’s passage this year.
Why banks are fighting on both fronts
The banking industry’s coordinated action across both pieces of legislation illuminates a clear commercial strategy. Traditional financial institutions are navigating a rapidly closing window to shape the market structure of digital assets before they become fully entrenched in the broader economy.
If the GENIUS Act sets the foundational operating framework for nonbank stablecoin issuers, and the CLARITY Act preserves the economic incentives for consumers through exchange-based rewards, traditional banks will face a vastly different competitive landscape.
In that scenario, tokenized dollars transition from being simple mechanisms for trading digital assets into highly useful, interest-bearing instruments that compete directly with bank deposits.
By seeking to delay the rulemaking process for the GENIUS Act, the banking sector gains valuable time.
By simultaneously lobbying to strip yield provisions from the CLARITY Act, they are attempting to neutralize the primary economic incentive that would drive consumers away from traditional savings accounts.
Essentially, their objective is to ensure that stablecoins are strictly confined to serving as payment rails.
In doing so, commercial banks are attempting to erect a regulatory moat around their deposit-funded lending models, protecting the core mechanism of traditional finance from decentralized competition.
