'Genius Act' 2nd comment solicitation closes… Financial sector and crypto industry clash

Son Min

Summary

The U.S. Department of the Treasury is reported to be facing a clash between the crypto industry and the financial sector over a ban on interest payments for stablecoins ahead of the implementation of the 'Genius Act.'
Coinbase argued for an exemption for non-issuer entities from the ban on interest payments, while banking groups requested a comprehensive ban.
The Genius Act is expected to take effect between late 2026 and early 2027, and the direction of the related rules is likely to affect the stablecoin market.

The U.S. Department of the Treasury is receiving conflicting interpretations and recommendations from the cryptocurrency industry and traditional financial sector ahead of the implementation of the corporate 'Genius Act (GENIUS Act)' related to stablecoin payments.

On the 5th (local time), according to CoinDesk, Coinbase argued in its comment letter to the Treasury Department that "the provision prohibiting interest payments on stablecoins should apply only to issuers" and "non-issuer entities such as exchanges should be exempt." Coinbase emphasized that "this aligns with the intent of Congress when enacting the law."

Meanwhile, banking groups led by the Bank Policy Institute (BPI) requested that the Treasury Department impose a "comprehensive ban including non-issuer entities." They warned that if interest payments on stablecoins are not broadly prohibited, "funds of about $6.6 trillion could flow out of existing bank deposits."

This discussion was part of the second comment solicitation (ANPRM) the Treasury conducted to draft implementing rules for the Genius Act, and the comment period closed on the 5th.

In a joint statement, the BPI said, "The Genius Act's prohibition on interest or yield payments should apply equally to issuers as well as affiliates, partners, exchanges, and all digital asset service providers."

In response, Coinbase rebutted, saying "Congress did not include non-issuer entities in the prohibition to avoid stifling innovation and growth in the stablecoin market," and "the Treasury Department does not have the authority to reinterpret Congress's decision."

Coinbase also proposed in its comment letter ▲exemptions for nonfinancial software and blockchain validators and open-source protocols from regulation ▲recognition of payment stablecoins as cash equivalents for accounting and tax purposes.

The Genius Act was enacted last July, and its effective date is scheduled to be 18 months after promulgation or 120 days after related rules are finalized. Implementation is expected between late 2026 and early 2027.