The NCBA has joined with state bankers associations nationwide to urge the U.S. Treasury Department to uphold the Genius Act’s prohibition on stablecoin issuers paying interest or yield on payment stablecoins.

Some digital platforms that allow users to buy, sell, and store cryptocurrencies in digital wallets have been paying a yield of sometimes in excess of 4% APY to users holding certain types of payment stablecoins in their digital wallets. These platforms have been able to pay such a hefty yield in part because of agreements between stablecoin issuers and the digital platforms whereby the issuers are sharing with the platforms a large portion of the investment return on their required reserves.

With a one-to-one conversion of U.S. dollars into newly issued stablecoins, some issuers now have tens of billions in reserves in the form of cash and short-term U.S. Treasuries. If the dollars going into digital wallets are coming from deposits that were held at banks and don’t also flow back in the other direction, the dollars are no longer available to support activities like bank lending.

Author: sdbrownlow

Student of Design