GENIUS Act Key Provisions In Spotlight: XRP Attorney Deaton Alerts To Bankers’ Role

Overview

As discussions around the potential passage of the CLARITY Act gain momentum, Faryar Shirzad from Coinbase has brought attention to the contentious provisions of the GENIUS Act. The debate centers on stablecoin rewards and the implications of banking interests on this emerging financial landscape.

GENIUS Act Under Fire

Faryar Shirzad, the Chief Policy Officer at Coinbase, has highlighted that the stablecoin rewards provisions of the GENIUS Act are a major point of contention among lawmakers. He has expressed concerns that reopening discussions on these provisions could introduce uncertainty and jeopardize the future of the US Dollar as commerce increasingly shifts to on-chain transactions. Shirzad argues that stablecoin rewards are beneficial for consumers and do not negatively impact community banks.

He has suggested that the opposition from banks regarding stablecoin rewards is driven by financial motivations. According to Shirzad, U.S. banks generate significant annual revenues from the substantial amounts of money they hold at the Federal Reserve and from card swipe fees. This revenue stream is estimated to be around $176 billion from deposits and another $187 billion from fees, which translates to an average of approximately $1,440 per household. He points out that this results in over $360 billion annually from payments and deposits, while banks also maintain a considerable unused lending capacity due to incentives from the Federal Reserve to keep reserves.

Shirzad contends that stablecoin rewards challenge these financial margins by fostering competition in payment systems, rather than hindering banks’ lending capabilities. He also raised concerns about the geopolitical implications of these discussions, noting that China has recognized the opportunity to undermine the dominance of the US dollar by offering interest payments on its Digital Yuan. He warned that a ban on rewards in the Senate could inadvertently support China’s ambitions.

Deaton Critiques ABA’s Threat To Stablecoin Rewards

John E. Deaton, an attorney for XRP holders involved in the SEC’s lawsuit against Ripple Labs, has also commented on these developments. He underscored the significance of the situation, particularly as China has begun offering interest on its digital currency. Deaton pointed out that the American Bankers Association (ABA) is pressuring the Senate to close a “third-party loophole” in the GENIUS Act, which could hinder companies like Coinbase and Kraken from providing rewards to consumers.

Deaton argues that restricting American firms from offering yield to citizens does not protect banks, contrary to the ABA’s claims. Instead, he warns that such actions could lead to increased global reliance on China’s currency over the US dollar. He expressed that major banks feel threatened by the concept of digital dollars, as they cannot generate profits by lending money back to consumers who are earning yields themselves. Furthermore, he criticized banking officials for crafting anti-crypto legislation that undermines the interests of average Americans. Deaton asserts that capitulating to the bank lobby would impose a hidden tax on retail investors and customers, ultimately protecting Wall Street’s profits at the expense of the public.

From author

The ongoing discussions surrounding the GENIUS Act and its provisions on stablecoin rewards reveal a complex intersection of consumer interests, banking revenue models, and international competition. The arguments presented by both Shirzad and Deaton underscore the pivotal role that stablecoin rewards could play in the evolving financial landscape, highlighting the potential risks and benefits associated with regulatory decisions.

Impact on the crypto market

• The debate over stablecoin rewards highlights the tensions between traditional banking interests and emerging cryptocurrency models.
• Regulatory decisions on stablecoin rewards could significantly influence consumer access to financial products and services.
• The potential for increased competition in payment systems may reshape the financial landscape, affecting how banks operate.
• The geopolitical implications of these discussions could impact the dollar’s status as the world’s reserve currency.
• The response from lawmakers to banking pressure will signal the regulatory environment’s openness to innovation in the crypto space.