Key Provisions of the GENIUS Act: Insights from XRP Attorney Deaton on Bankers’ Concerns

In light of the upcoming potential passage of the cryptocurrency market structure legislation known as the CLARITY Act, Faryar Shirzad, who serves as the Chief Policy Officer at Coinbase, has spotlighted the ongoing discussions regarding key elements of the already enacted GENIUS Act.

Key Takeaways

Faryar Shirzad of Coinbase highlights the significant role of stablecoin rewards in the ongoing discussions regarding the GENIUS Act.
Concerns are raised about how restricting stablecoin rewards may aid China’s Digital Yuan and threaten the US dollar's dominance.
John E. Deaton criticizes the American Bankers Association for pushing legislation that could cripple rewards for consumers.
Resistance from banks to stablecoin rewards appears to stem from potential threats to their revenue rather than consumer safety concerns.

GENIUS Act

Analyzing the GENIUS Act

Shirzad pointed out that the provisions concerning stablecoin rewards within the GENIUS Act are currently a major focus of legislative debate. He emphasized, “Reopening it now only creates uncertainty and risks the future of the US Dollar as commerce moves on-chain.” He stressed the need to safeguard the GENIUS Act, arguing that the rewards provided to users are beneficial for consumers without negatively affecting community banks.

He suggested that the banks’ resistance to stablecoin rewards is quite transparent. According to him, US banks earn roughly $176 billion each year from the $3 trillion they have at the Federal Reserve (Fed) and around $187 billion from card swipe fees. This averages out to approximately $1,440 for every household.

This results in a yearly revenue exceeding $360 billion from payments and deposits, alongside a significant amount of unused lending capacity. Shirzad noted that the Federal Reserve encourages banks to retain these reserves rather than use them.

He believes that stablecoin rewards could impact these financial margins—not by limiting banks' ability to lend money but by fostering genuine competition in payment systems. Furthermore, he expressed concern over China's recent moves during Senate discussions. China has started offering interest payments to users of its Digital Yuan, which could pose a threat to the dominance of the US dollar. He cautioned that prohibiting rewards in the Senate might inadvertently support China’s efforts to challenge the dollar’s standing.

In closing, Shirzad maintained that the banks’ opposition to stablecoin rewards is not due to safety concerns but is motivated by a desire to protect their profitable revenue streams jeopardized by competition.

Deaton's Critique of the ABA's Stance on Stablecoin Rewards

John E. Deaton—an attorney representing XRP holders in the US Securities and Exchange Commission’s (SEC) lawsuit against Ripple Labs, as well as a former Senate candidate—also weighed in on these developments. He underscored the significance of the moment as China officially commenced offering interest on the Digital Yuan.

Deaton remarked that the American Bankers Association (ABA) is pressuring the Senate to eliminate a “third-party loophole” within the GENIUS Act, which would prevent firms like Coinbase (COIN) and Kraken from giving rewards to consumers.

He contended that banning American companies from providing yields to everyday people does not protect banks, as the ABA claims. Instead, it risks pushing global reliance on China's currency over the US dollar. He emphasized that major banks feel threatened by the notion of digital dollars because they cannot “rent” that money back to consumers if individuals are earning yield independently.

His criticism also targeted banking officials, asserting that the Banking Policy Institute, led by figures such as Jamie Dimon, crafted an anti-crypto bill last year that undermines the interests of average Americans. Deaton argued that should the Senate yield to the bank lobby, it effectively levies a hidden tax on retail investors and consumers nationwide to protect Wall Street's profits.

GENIUS Act The daily chart illustrates the total cryptocurrency market capitalization, estimated at $3.08 trillion. Source: TOTAL on TradingView.com