The banking industry is intensely lobbying against stablecoin rewards, not primarily due to concerns about financial stability, but to safeguard a massive, largely undisclosed revenue stream totaling over $360 billion annually. This significant sum, derived from interest paid on bank reserves held at the Federal Reserve and from pervasive card swipe fees, is now directly threatened by the growing appeal and competitive yields offered by stablecoins. The unfolding regulatory battle highlights a fundamental conflict between incumbent financial institutions and emerging digital assets vying for a share of the payments and deposit market.
The $360 Billion Revenue Machine Under Threat
US banks currently enjoy two primary, low-risk revenue streams that stablecoins directly challenge. First, they earn approximately $176 billion annually by parking nearly $3 trillion in reserve balances at the Federal Reserve, an arrangement that escalated significantly post-2008 with the Fed's "ample reserves" framework. This creates a risk-free, interest-earning pool of deposits for banks. Second, banks collect a staggering $187 billion each year from card swipe fees, amounting to nearly $1,400 per US household, which merchants pay to process credit and debit transactions. Stablecoins, by offering competitive yields funded by Treasury securities and facilitating transactions at a fraction of card network costs, directly threaten both these lucrative revenue streams, allowing users to bypass traditional bank balance sheets and capture value directly.
The Regulatory Battleground: GENIUS Act and Competing Interests
The GENIUS Act, enacted in July 2025, makes it unlawful for stablecoin issuers to pay interest directly or indirectly. However, crypto exchanges have circumvented this by routing rewards through affiliate programs, presenting them as loyalty incentives. Banking groups, led by the American Bankers Association, are actively pressuring Congress to extend this ban to "all affiliated entities and partners," framing their opposition as a prudential concern to prevent deposit flight and protect lending capacity. However, independent research contradicts this narrative, showing minimal to no statistically significant impact of stablecoin growth on community bank deposits. This suggests the banks' true motivation is not deposit stability but rather the defense of their substantial, risk-free margins against competitive alternatives that offer users a direct claim on Treasury yields and lower transaction costs.
A Fork in the Road for Policy
The ongoing legislative debate hinges on how broadly Congress interprets the GENIUS Act. A narrow interpretation, applying the ban only to stablecoin issuers, would preserve competition and allow exchanges to continue offering rewards, making stablecoins an attractive alternative to traditional low-yield accounts. Conversely, a broad interpretation, extending the ban to affiliate programs, would cement a regulatory advantage for incumbent banks, effectively preventing stablecoins from serving as substitutes for interest-bearing transaction accounts. This policy decision carries significant implications, not only for consumer choice and market innovation but also for national security. If the US stifles stablecoin yields while foreign digital currencies, like China's digital yuan, begin offering interest, it could disadvantage the dollar in the global digital economy. Ultimately, the battle is less about prudential risk and more about who captures the $360 billion in revenue generated by payments and deposits.
