U.S. banking groups are urging regulators to slow parts of the federal rollout of the GENIUS Act, opening a new front in their broader battle over how far stablecoins should be allowed to move into an area 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 deadlines for public comments on 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 Coin (OCC) finalizes its own regulatory framework.
This procedural request could delay the activation of the federal stablecoin law by several months.
Notably, the move comes as traditional banks are actively pressuring lawmakers in the Senate to tighten limits on stablecoin rewards in the broader Digital Asset Market Clarity Act, or CLARITY, signaling a coordinated effort on two fronts to clamp down on the digital asset sector.
At the heart of both conflicts is a fundamental economic interest: commercial lenders want stablecoins to be strictly limited 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 credit models that underpin the U.S. credit system.
Why the banks want to spend more time on the GENIUS rules
The GENIUS Act, which was signed into law last year, laid a foundation for stablecoin issuance but requires final administrative rules to take effect.
The OCC, by law, serves as the primary regulator for non-bank stablecoin issuers and has proposed a foundational framework that is still under consideration.
The banking associations argue that three overlapping federal proposals are “substantially connected” to the OCC’s main rule.
These include a Treasury Department rule that evaluates 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) regarding anti-money laundering and sanctions compliance.
In their communications to the agencies, the banking groups argued that a fragmented comment process with staggered deadlines on interdependent proposals would undermine the goal of regulatory consistency.
They argued that public feedback would be more comprehensive if stakeholders could evaluate all proposed rules against a final OCC framework.
However, the practical effect of granting this extension would be a significant delay. By law, the GENIUS Act would take effect 120 days after the final regulations are issued, or 18 months after their enactment.
By linking the Treasury Department and FDIC timelines to the OCC’s delayed schedule, the banking industry is effectively attempting to delay the deployment of regulated, non-bank stablecoin infrastructure.
The battle for stablecoin rewards is holding back a new crypto account
As the commercial lending industry attempts to slow the regulatory rollout of the GENIUS Act, it is also engaged in a fierce lobbying effort to change the CLARITY Act.
The banking industry is aggressively challenging provisions that would allow third-party platforms to offer returns on stablecoins. Essentially, this escalates what seems like a technical dispute into a battle over the future of interest-bearing money substitutes.
The GENIUS Act expressly prohibited stablecoin issuers from paying interest directly to holders.
However, it left a path open for secondary arrangements where trading platforms and other third-party platforms could pay rewards for holding stablecoins on their platforms. The banking sector is calling 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 messages warn lawmakers that allowing stablecoins to generate returns poses a direct threat to the viability of credit markets for local communities.
These arguments recently drew 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 only $2.1 billion, amounting to a negligible 0.02% of outstanding loans.
The CEA report also estimated that a complete ban on yields would cost consumers approximately $800 million.
This data has significantly weakened the banking industry’s central argument that unlimited stablecoin returns pose a structural vulnerability to the traditional banking system.
However, ABA responded that the White House is measuring the wrong problem. According to her, the analysis focused on the current stablecoin market of approximately $300 billion, rather than on modeling a future in which reward-bearing stablecoins scale up and compete more directly with the country’s much larger deposit base.
That difference in framing is central to the political struggle. Crypto companies argue about current utility, while banks argue about future movement.
What is holding up the CLARITY Act?
The yield dispute has become the key sticking point slowing the progress of the CLARITY Act through the Senate Banking Committee.
The legislation aims to establish comprehensive jurisdictional boundaries between federal market regulators and create a path for treating digital assets 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 will ban returns 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 until May, a move that poses serious timing constraints on 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 non-custodial developers and limits on the SEC’s relief authority.
With the Senate calendar becoming increasingly busy due to an election year, the May markup delay significantly increases 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 until 2030 if it is not passed this year. Meanwhile, crypto bettors on Polymarket believe there is less than a 50% chance of the bill passing this year.
Why banks are fighting on both fronts
The coordinated action of the banking sector in both legislative instruments illustrates 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 establishes the fundamental operating framework for non-bank stablecoin issuers, and the CLARITY Act preserves economic incentives for consumers through exchange-based rewards, traditional banks will face a vastly different competitive landscape.
In that scenario, tokenized dollars turn from simple mechanisms for trading digital assets into very useful, interest-bearing instruments that compete directly with bank deposits.
By attempting to delay the GENIUS Act rulemaking process, the banking industry buys valuable time.
By simultaneously lobbying to remove the return provisions from the CLARITY Act, they are attempting to neutralize the main economic incentive that would drive consumers away from traditional savings accounts.
Essentially, their goal is to ensure that stablecoins are strictly limited to serving as payment rails.
In doing so, commercial banks seek to erect a regulatory moat around their deposit-funded lending models, protecting the core mechanism of traditional finance from decentralized competition.