Digital Assets

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Interest in Digital Assets

In recent years, there has been increased interest in the United States and around the world in digital assets. Proponents believe digital assets like cryptocurrencies and stablecoins offer opportunities to improve efficiency, transaction speed, and access to financial services. At the same time, these new financial tools present new and different risks that policymakers must address.  With the right rules in place, we can embrace the future without compromising financial stability.

What’s the issue?

This year Congress began establishing the first rules of the road for digital assets. In July 2025, lawmakers passed the GENIUS Act, which established a regulatory framework for stablecoin issuers. Key aspects of the GENIUS Act include:  

• Defining which entities may serve as stablecoin issuers and who will supervise them
• Establishing capital, liquidity, reserve asset diversification and other requirements for stablecoin issuers 
• Prohibiting payment stablecoin issuers from paying interest or yield on payment stablecoins 

Loopholes in GENIUS Act 

The GENIUS Act is a key step toward a safer digital asset market, but some companies are already looking for loopholes in the law. Despite the GENIUS Act’s clear prohibition on interest, some crypto businesses are trying to bypass the interest ban by calling payments “rewards” and routing them through crypto exchanges or other market players. This is a clear effort to skirt the law and defy Congressional intent, with real risks for the economy and financial stability.

Allowing companies to exploit this loophole would create an incentive for people to pull deposits at their local bank, which would reduce the amount of funds available for local lending to consumers and small businesses. It would ultimately slow economic activity – exactly the outcome GENIUS Act supporters sought to avoid.

What can Congress do now?

The GENIUS Act covers only a small portion of the digital asset market, while market structure legislation still being developed sets broader rules for the entire ecosystem. Together, they create the foundation for comprehensive regulation. Congress can use the pending market structure legislation to close the loopholes left by the GENIUS Act by adopting the following recommendations: 

• Extend restrictions on paying interest or yield on payment stablecoins to cover all market participants thereby ensuring that payment stablecoins act as a payment tool rather than a store of value, which will minimize negative unintended consequences for the banking system and the broader economy. 
• Repeal section 16(d) of the GENIUS Act to protect consumers and competition by guaranteeing state banking regulators have the authority to supervise out-of-state depository institutions. 
• Prohibit all non-financial companies from issuing stablecoins, restricting their ability to siphon deposits from community banks and therefore preserving local credit access and preventing conflicts of interest and the concentration of economic power.

What’s at risk?

Policy that safeguards consumers from risk, advances economic stability, and preserves credit access is essential. Lawmakers can protect the financial system and embrace the future by simply clarifying the rules of the road for digital assets. Congress has a chance to implement the above recommendations into the digital asset market structure legislation, addressing the loopholes left open in the GENIUS Act and guaranteeing that the digital asset market operates in a responsible, efficient and secure manner. With your help, we can get Congress to fix this issue while delivering the reasonable regulatory framework the digital asset marketplace needs.