The $360 Billion Bank Defense: How Stablecoin Rewards Became a Regulatory Battle

Banks are waging a regulatory war to block stablecoin rewards, targeting a $360 billion revenue fortress built on Fed reserves and card fees. US banks earn $176 billion annually from Federal Reserve reserves and $187 billion from card swipe fees, creating a non-lending revenue buffer that shields them from volatile markets.

The GENIUS Act, signed in July 2025, explicitly bans stablecoin issuers from paying interest "directly or indirectly," but loopholes allow rewards to flow through affiliate programs.

This legal ambiguity has become a focal point for banking groups like the American Bankers Association, which lobbies to expand the law to "all affiliated entities and partners."

Charles River Associates’ research (2019–2025) found no statistically significant link between USDC growth and community bank deposit losses, yet the industry remains wary.

Stablecoin transaction volume hit $33 trillion in 2025—triple the value of US card purchases—threatening traditional payment networks. Bank Policy Institute seeks legislative clarity to treat affiliate-linked rewards as prohibited yield under the GENIUS Act, aiming to prevent stablecoins from substituting for interest-bearing accounts.

Stablecoin rewards (1–3%) funded by Treasury bill yields compete with high-yield savings accounts but lack the scale to trigger mass deposit flight.

Speaker said:

"The $360 billion revenue shield isn't just a number—it's a strategic moat banks are defending against the disruptive force of stablecoins, which now process three times the transaction volume of traditional cards. The legal gray areas in the GENIUS Act mean this battle could reshape how digital money competes with legacy systems."

⚠️ LEGAL DISCLAIMER: This article is for informational purposes only and does not constitute financial or investment advice.