Banking Industry Makes Blocking Stablecoin Interest Payments Its Primary 2026 Goal
Preventing stablecoin yields has emerged as the leading objective for the American Bankers Association while congressional lawmakers work toward passing cryptocurrency market structure regulations ahead of midterm elections.
Restricting stablecoin yield has emerged as the number one objective for the American Bankers Association (ABA) in 2026, as the organization continues its debate with United States legislators regarding potential damage to the banking sector's competitive position.
In a Tuesday announcement, the ABA outlined its key focus areas for the current year, emphasizing the need to "stop payment stablecoins from becoming deposit substitutes that slash community bank lending by prohibiting paying interest, yield or rewards regardless of the platform."
The stablecoin regulation issue led a slate of five key priorities, with additional items including combating financial fraud, resisting arbitrary interest rate caps, and concentrating efforts on indexing and mission-driven banks. According to ABA CEO and president Rob Nichols, these priorities reflect feedback gathered from diverse banking institutions and businesses across various sizes and operational models.
Banking executive warns of potential $6 trillion deposit exodus
The central point of contention between the banking association and cryptocurrency sector revolves around whether stablecoins that offer yields will siphon deposits from conventional banking institutions, which the banking lobby contends would diminish lending capacity and undermine banks' position within the financial ecosystem.
Earlier this month, Bank of America CEO Brian Moynihan made the case that as much as $6 trillion in deposits could migrate from traditional banks into stablecoins that pay interest.
While the GENIUS Act, which became law last year, banned stablecoin issuers from providing interest or yield to token holders, the ABA's Community Bankers Council expressed concerns in a January letter to legislators that a potential loophole in the legislation could allow yield-bearing stablecoins to undermine conventional banking institutions.
Circle CEO calls banking concerns "totally absurd"
The Community Bankers Council urged the Senate to incorporate provisions into market structure legislation that would strengthen stablecoin regulations to block issuers from distributing yield through intermediary parties.
Nevertheless, cryptocurrency industry leaders maintain that permitting stablecoin yields would produce more benefits than drawbacks.
Circle CEO Jeremy Allaire rejected the notion that stablecoin yields might precipitate bank runs as "totally absurd." "They help with stickiness, they help with customer traction," he said at the World Economic Forum in Davos.
In the meantime, Anthony Scaramucci, founder of asset manager SkyBridge Capital, argued that banning yield-bearing stablecoins places the US dollar at a competitive disadvantage to China's digital yuan, a yield-bearing central bank digital currency.