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It is necessary to prohibit crypto exchanges from charging interest and bonuses for storing stablecoins, otherwise small regional banks will lose the competition and face serious problems, said the Independent Community Bankers of America’s (ICBA).
The Chairman of the ICBA Subcommittee on Digital Assets, Kevin Paintner, called on Congress to extend the ban on accruing income for the ownership of stablecoins to all crypto platforms and their affiliated companies. Currently, such measures, prescribed in the GENIUS law, are enshrined only in relation to issuers of payment stablecoins.
Cryptocurrency platforms and intermediaries offer clients income for storing stablecoins on their sites. In fact, it is similar to a savings account at a bank – one of the most popular financial products. However, unlike banks, deposits of crypto exchanges are deprived of guarantees provided by law – they are not covered by the deposit insurance system, Peitner noted. At the same time, you do not have to pay taxes on such income.
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According to ICBA, if crypto platforms retain the right to charge income on stablecoins, this could lead to a reduction in bank deposits by $1.3 trillion and the volume of lending by small local banks by $850 billion.
If the stablecoin market grows from $300 billion to several trillion dollars by the end of the decade, the structure of traditional bank deposits will change dramatically. Banks will face outflows of funds, which will increase liquidity risks and funding costs, Peitner insists. Small businesses, which rely heavily on personal banking services, will be especially hard hit by the credit crunch. As a result, “consolidation of the banking industry” could accelerate, and the reduction in the number of banks will deprive small local communities, primarily farms, of access to credit.
ICBA recalled that regional banks issue 81% of loans for the purchase of real estate to farmers, 74% of loans for farm development and almost 90% of loans for small farm plots. In addition, local banks account for 71% of rural branches and nearly two-thirds of rural deposits.
On Thursday, January 15, the Senate was going to consider a bill called CLARITY, on the delimitation of powers to control the crypto market. However, the hearing was postponed. Among the reasons is sharp criticism from major market players. The CEO of the largest American crypto exchange Coinbase, Brian Armstrong, criticized the bill, saying that lack of regulation is better than a bad law that infringes on the rights of participants in the crypto industry. At the same time, large banks supported the idea of limiting the profitability of stablecoins.
