Community Financial Trade Associations Urge Congress to Close Stablecoin Loophole Threatening Trillions in Local Lending

A coalition of national trade associations representing thousands of community banks and credit unions today issued a unified call for Congress to take urgent action to prevent what they warn could be a multitrillion dollar disruption to local lending across the United States.

In a new joint letter to the U.S. Senate, the CEOs of the American Bankers Association, America’s Credit Unions, the Association of Military Banks of America, the Community Development Bankers Association, the Defense Credit Union Council, Inclusiv, the Independent Community Bankers of America, and the National Bankers Association call on Congress to use pending crypto market structure legislation to close a loophole in stablecoin rules that threatens to undermine the local lending that drives economic growth in communities across the country.  

The rapid expansion of payment stablecoins has introduced new dangers when issuers or related firms offer incentives such as yields, promotional rewards or interest-like payments, according to the letter. These inducements could siphon deposits away from regulated community banks and credit unions, reducing the availability of home, small business, agricultural and community development loans.

“Every deposit represents a home loan, a small business loan or an agricultural loan,” the associations wrote. “Simply stated, policies that undermine bank and credit union deposits destroy local lending.”

The letter notes that Congress previously prohibited interest payments on stablecoins in the GENIUS Act to ensure stablecoins function strictly as payment tools rather than stores of value. However, recent market activity demonstrates that this safeguard has been weakened through indirect arrangements with exchanges and affiliated firms.

The trade association leaders warn that without clear statutory language extending the ban on all forms of stablecoin inducements in current market structure legislation, trillions of dollars could be displaced from community financial institutions, weakening the financial fabric of towns and neighborhoods nationwide.

The groups urged Congress to adopt a comprehensive prohibition on all inducements, whether paid directly by the issuer or through any affiliated platform or partner, to preserve stablecoins as payment instruments and protect deposit funded lending in communities across the country.

The full letter is available here: https://www.aba.com/advocacy/policy-analysis/Joint-Trade-Association-Letter-on-Stablecoin-Loophole

About the American Bankers Association

The American Bankers Association is the voice of the nation’s $25.1 trillion banking industry, which is composed of small, regional and large banks that together employ more than 2 million people, safeguard $19.7 trillion in deposits and extend $13.2 trillion in loans.

About America's Credit Unions

America’s Credit Unions is the unified voice for not-for-profit credit unions, representing more than 95% of the industry's assets and their more than 144 million members nationwide. America’s Credit Unions provides strong advocacy, resources and services to advance, empower, and protect credit unions and the people and communities they serve. For more information about America’s Credit Unions, visit AmericasCreditUnions.org. 

About the Association of Military Banks of America

The Association of Military Banks of America (AMBA) is the nation’s only not-for-profit trade association of banks operating on military installations, banks not located on military installations but serving military and veteran customers, and military banking facilities designated by the United States Treasury. Founded in 1959, the association’s membership includes community banks and large multinational financial institutions, all of which are insured by the Federal Deposit Insurance Corporation. You can learn more about AMBA at www.militarybanking.org.

About the Community Development Bankers Association

For over two decades, the Community Development Bankers Association has led the community development banking movement, advocating for financial inclusion, racial equity, and economic opportunities in the nation’s most economically distressed areas. The CDBA and its member banks are located in 26 states and Washington, DC, and are unwavering in their commitment to making banking a force for good. For more information on the CDBA’s mission and initiatives, please visit www.cdbanks.org.

About the Defense Credit Union Council

The Defense Credit Union Council is the trusted resource for credit unions on all military and veteran matters. By maintaining a close and constant liaison with the Pentagon, Capitol Hill, and NCUA, DCUC champions the interests of credit unions serving our military and veteran communities by coordinating policy, procedures, and legislation impacting morale and welfare, financial readiness, and the delivery of quality financial products and services. Organized in 1963, DCUC’s membership is comprised of more than 180 credit unions with over 40 million members. If you would like more information, visit dcuc.org, or contact DCUC at [email protected].

Inclusiv is the leading network of credit unions with a primary mission of promoting community development and financial inclusion. The Inclusiv network represents more than 450 credit unions serving more than 19 million people in predominantly low-income urban, rural, and reservation-based communities across the United States, including Puerto Rico, Guam, and the U.S. Virgin Islands. As a CDFI, Inclusiv deploys capital and provides training and technical assistance to build the capacity of its member credit unions.

About the Independent Community Bankers of America

The Independent Community Bankers of America® has one mission: to create and promote an environment where community banks flourish. We power the potential of the nation’s community banks through effective advocacy, education, and innovation.

As local and trusted sources of credit, America’s community banks leverage their relationship-based business model and innovative offerings to channel deposits into the neighborhoods they serve, creating jobs, fostering economic prosperity, and fueling their customers’ financial goals and dreams. For more information, visit ICBA’s website at icba.org.

About the National Bankers Association
About NBA Founded in 1927, the National Bankers Association champions minority depository institutions, advocating for mission-driven banks that serve underserved and low- to-moderate-income communities. Representing community banks across 43 states and territories, NBA promotes economic empowerment, capital access, and financial inclusion. Learn more at www.nationalbankers.org.