The Banking Policy Institute (BPI), a group of advocacy for the banking industry chaired by JPMorgan CEO Jamie Dimon, wrote A Letter In Congress last week, it is upheld that Stablecoins presents a risk to existing credit systems.
BPI urged regulators to close the supposed loopholes in the Genius Act, a new law that controls the Stablecoin industry in the US, lest a transfer from bank deposits increases lending costs and reduces business loans.
The bank’s lobby holds a major change in Washington, and while it can be complicated by making the law, some argue that it is inevitable: a future denomination with stablecoins.
Banks said Stablecoin’s interest was a threat
Known members in the crypto industry have long argued that those who provided stablecoin should be allowed to offer users’ interests. In March, CEO of Coinbase CEO Brian Armstrong said the stablecoins carrying interest Give users more control In financial products.
But according to Andrew Rossow, a policy and public affair attorney, onchain’s new interest meant problems such as solvency, liquidity and investor protection are not straightforward.
“The claims of ‘easy compliance’ will not notice the complex facts of ensuring proper reserves, anti-money laundering/knowing your customer and neat administration at once,” he told Cointelegraph.
The BPI letter responds directly to these concerns. It is especially called in question by a so-called “loophole” in Sec. 4 (a) (11) of the genius, which prohibited Stablecoin releases from the payment of “any form of interest or yield (if in cash, token, or other consideration) are related only to the handling, use, or maintenance of such a stablecoin payment.”
This section seems to be prohibiting the provision of stablecoins, but according to Aaron Brogan, a law -focused law founder, “many believe it does not forbid the dealings between exchanges and those who give.”
The ability for other companies, such as exchanges, to allow interest in stablecoins is based on factors other than “handling use or maintenance” as mentioned in genius. The word “only” in the Genius Act is a “strong legal limiter, and that really means that if there is another basis for deals, they are unlikely to qualify,” he told Cointelegraph.
So, while the genius is “written to appear complete, the ban on interest is probably really small.”
Related: US Treasury calls for public comment on Genius Stablecoin Bill
Stablecoins, which often offer higher interest than traditional bank offerings, “do not replace bank deposits, money market funds or investment products, and those who provide payment are not controlled, administered or reviewed in the same way,” BPI said.
It said it brings a threat to existing credit models. As things stand, customer deposits allow banks to create a significant part of the money supply through loans and credit lines.
“Encouraging a transition from bank deposits and money market funds to Stablecoins will end with increasing lending costs and reducing loans to businesses and consumer households,” BPI said.
Concerns in the banking industry may have some grounding, Rossow says. “The strongest argument of the bank lobby is to allow Stablecoin issues to pay interest dangers will create irregular ‘shadow of banks,’ threat of financial stability and consumer safety. If there is no stable capital, reserve and administration requirements, stablecoin providers can be able Danger, “he said.
However, the position of banks begins to separate when it calls the interest that paid the stablecoins “naturally dangerous,” Rossow said. Given that some measures from the crypto industry show that it is possible to allow the interest of the provide with the right regulation, “a total ban may seem more about protecting traditional banks than the balanced development.”
Is the Genius Act amended?
Chasing self -interest at the expense of greater good is essentially taken for Washington. In this regard, the powerful and conflicting influence on the policy -making process can “mix laws and regulations, leading to a policy that results in compromises that are likely to please either, only to create additional uncertainty in the market,” Rossow said.
He said that, prior to the financial crisis in 2008, mortgage lenders blocked tighter predatory lending regulations, which directly contributed to the financial risk that led to the collapse of the financial system.
“These lobbyings only serve to expand regulations and weaknesses that distract our financial stability and consumer protections, more public confidence and, now more relevant than ever, our government’s ability to adjust abs
But the ability of the banking industry to actually challenge Stablecoins is limited, and it can only try to challenge the inevitable, according to Brogan. It is not likely that the crypto industry will receive amendments to Genius, a law in which it has made concessions.
“The bank’s lobby is tilted to windmills here. Sometimes you see new languages that are snucking into other laws like pigs, but I doubt something that can be significantly passed under the radar. I do not expect more Stablecoin law in this congress,” he said.
Instead, Brogan said the banks were pushing back against the inevitable, drawing on the historical example of music executives that had elaborated increased digital music and file sharing.
“People don’t want to use banks to make payments, they just have to. Now, they don’t. Like digital music files are better than CDs, disintermediated finance is better and easier than traditional banking,” he said in a recent Blog post.
The banking industry has a huge snatch in Washington, but its concerns about Stablecoins can be a day late and a short dollar. The crypto industry is now capable of promoting its own interests that are successful and influenced, and it has done in the form of genius.
What remains to be seen is how this new financial arrangement is emerging for the day -to -day investors. Each BPI, a move towards stablecoins means “higher interest rates, fewer loans, and increased costs for major street businesses and households.”
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