GENIUS Act Changes Ignite Debate Over U.S. Crypto Future

Jimmy Aki
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U.S. crypto executives are warning that proposed changes to the GENIUS Act could weaken competition, reduce consumer choice, and harm the global standing of dollar-backed stablecoins if limits on rewards are expanded.

Industry leaders argue that the revisions, pushed largely by banking groups, would reshape the GENIUS Act beyond its original intent. They say tighter controls on stablecoin rewards could tilt the market in favour of large banks while slowing innovation across the digital asset sector.

Stablecoin Reward Limits Draw Sharp Industry Backlash

The debate focuses on whether lawmakers should further restrict reward mechanisms tied to stablecoins.

 

Under the current framework, issuers are already barred from paying interest directly.

Banks are now urging Congress to extend those limits to third-party programs, claiming such rewards resemble deposits and pose risks to the financial system.

Crypto advocates dispute that claim. They say there is little evidence to suggest that stablecoins pose a threat to traditional banks or drain deposits on a large scale.

Instead, they argue that rewards offered through apps and platforms are a key driver of adoption and competition. Removing them, they warn, would narrow user options and weaken the appeal of dollar-pegged tokens.

Legal and geopolitical concerns have added urgency to the fight. Pro-crypto attorney John Deaton cautioned that broadening the ban on yield could backfire at a national level.

He warned that users may turn to foreign alternatives, including China’s digital yuan, which has begun offering interest-like incentives.
In his view, discouraging competitive U.S.-based stablecoins risks surrendering ground in the global contest over digital money and monetary influence.

Policy-focused executives have echoed those concerns. Paradigm’s Alexander Grieve said rolling back the rewards framework would undo years of bipartisan progress on sensible crypto regulation.

Galaxy Digital CEO Mike Novogratz said banks are opposing stablecoin rewards because they do not want new competition. He said the issue is not financial stability but discomfort with change, and warned that blocking new products will not stop the market from moving forward.

https://x.com/novogratz/status/2008945569104896419?s=20

As the debate has unfolded, the GENIUS Act has become the primary point of contention. Supporters of the bill say it was meant to set basic rules for dollar-backed stablecoins, not to give banks an edge.

They also caution that repeated revisions could create confusion and make companies hesitant to build under U.S. rules.

U.S. Lawmakers Look to Ease Small Crypto Payments

While the stablecoin fight continues, U.S. lawmakers are advancing separate proposals aimed at making routine crypto use more practical.
A draft bill in the House would exempt stablecoin payments under $200 from capital gains tax reporting, treating small transactions more like cash.

The proposal is narrowly scoped. It applies only to low-value purchases and excludes brokers and dealers, while preserving the Treasury Department’s authority to intervene if abuse emerges.

Lawmakers backing the measure say it removes friction from everyday payments without opening the door to large-scale tax avoidance.

The same draft addresses staking taxes by allowing taxpayers to defer income recognition on staking rewards for up to five years. Supporters say this fixes a long-standing problem in which rewards are taxed when received and again when sold.

Regulators have also shifted their stance. The Federal Reserve recently lifted guidance that effectively blocked banks from crypto activity.

State member banks can now engage with digital assets through standard supervisory processes, reflecting a view that crypto risks can be managed within existing oversight as the GENIUS Act debate continues.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.