Copyright Mechanicsburg Patriot News
By Duncan Campbell All across our Commonwealth, from Philadelphia to Pittsburgh, Erie to Altoona, and across all 67 Pennsylvania counties, our economy is driven by the spirit of collaboration and entrepreneurship. Every business clicking on the open sign, every manufacturing plant expanding means more jobs for our neighbors, more families sending kids to college, and more main streets retaining their vibrancy. At the center of that growth you will find one of our great Pennsylvania banks, providing the crucial start-up capital needed to make small businesses and families’ dreams a reality. Pennsylvania’s banks are locally focused, but always have an eye on the future. As the world becomes more digitally connected and cryptocurrency becomes more mainstream, banks across the Commonwealth want to work alongside, not in competition with innovation. But, that parallel path must involve a balance, which was reasonably struck with the GENIUS Act, which passed both the U.S. House and Senate on a bipartisan basis and was signed by President Donald Trump earlier this year. A key protection in the GENIUS Act for banks both big and small was the prohibition on stablecoins paying interest to account holders, in the same way your savings account with a local bank does. Without this protection, it is estimated that $6.6 trillion could leave the banking system. While some banks may be able to work around this, it would devastate many of the banks in our Commonwealth. Our banks use those deposits to make loans to local businesses or provide mortgages to aspiring homeowners, and without those deposits, the ability of those banks to lend to our neighbors, support small businesses, or provide capital for expansions would be severely limited. This prohibition on stablecoins paying interest just makes sense - stablecoins are intended to be a payment tool, like a digital debit card, not a store of value, like a bank account or other investment. Additionally, your bank account is FDIC insured, and your money market account is heavily regulated by several agencies to protect everyday Americans. These crucial consumer protections are in force because of years of thoughtful policymaking and hard work by our legislators and banking professionals. Neither of these protections exist for stablecoins or cryptocurrency in general, and we’ve all seen the stories of people falling victim to scams or simply losing more than they can afford. Unfortunately, some companies in the cryptocurrency space have found a loophole in the GENIUS Act. Affiliates of stablecoin issuers and third party exchanges technically can still offer rewards and interest payments to stablecoin holders. These companies disregarded the clear intent of the law and began launching rewards programs linked to stablecoins nearly immediately after passage. Despite the clear and obvious intent of the GENIUS Act, if you go to any one of the many crypto exchanges you will see the amount of interest being yielded by the stablecoin they are offering for purchase. If this loophole remains unaddressed, it will devastate American communities. According to an analysis by Stefan Jacewitz, assistant vice president and economist at the Federal Reserve Bank of Kansas City, every dollar that moves from banks to stablecoins could reduce bank lending by approximately 50 cents. Small businesses and families who rely on affordable loans would be severely impacted. President Trump, as well as both Republicans and Democrats in Washington, deserve credit for being future focused and making sure that the digital banking system and the traditional banking system can work together to more fully strengthen our nation. As policymakers in Washington consider the next steps in ensuring that America is the global leader in cryptocurrency, they should focus on maintaining the balance between traditional banks and digital financial institutions and extend the prohibition on providing interest to stablecoin holders to include affiliates and exchanges.
