- Major U.S. banking associations are lobbying the Senate to tighten stablecoin legislation, warning current proposals risk significant deposit flight from traditional banks.
- A new Galaxy research report argues stablecoin growth under the enacted GENIUS Act will be a net positive for U.S. credit, forecasting up to $1.2 trillion in expansion by 2030.
- Galaxy’s analysis contends 60%-70% of new stablecoin supply will come from offshore markets, outweighing domestic bank deposit migration by 2-to-1.
- The legislative battle now centers on the Clarity Act and whether exchanges can offer yield on stablecoins, a loophole banks are urgently trying to close.
In a direct clash over the future of finance, U.S. banking groups are urgently lobbying senators against proposed stablecoin rules, which they fear will trigger a massive exodus of depositors. This pushback follows a new analysis from Galaxy Research that directly counters the banking industry’s core argument.
According to Galaxy‘s head of research, Alex Thorn, the banks are “WRONG” about deposit flight. He wrote on X that imported offshore capital will outweigh domestic deposit migration by about two-to-one. Consequently, the firm sees stablecoins under the GENIUS Act as a powerful catalyst for U.S. credit growth.
Galaxy forecasts each new compliant stablecoin could generate nearly $0.32 in net U.S. credit. This translates to roughly $400 billion in credit growth through 2030 in a base case, and a staggering $1.2 trillion in a bull-case scenario. Meanwhile, the required reserve holdings in U.S. Treasuries could lower short-term bill yields by 3 to 5 basis points.
However, the immediate legislative fight has shifted to the pending Clarity Act. The GENIUS Act prohibits issuers from paying interest, but allows exchanges to offer rewards on stablecoin balances. Banks are now lobbying to close this perceived loophole, calling it an evasion of yield regulations.
In a letter described as their “direst warning yet,” banking associations told the Senate Banking Committee the current language would “enable evasion” and kill competition. Coinbase Chief Legal Officer Paul Grewal pushed back on X, stating, “That’s no narrow fix. That’s killing competition from new technologies. Enough already.” The Senate committee could mark up this critical bill as soon as next week.
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