Innovation, including financial innovation, is critical for driving our economy forward and increasing prosperity. However, major changes must be paired with thoughtful safeguards to make sure Mainstreet communities are not hollowed out and forgotten.
That’s why I’m sounding the alarm about the stablecoin loophole that threatens to devastate the very communities President Donald Trump has fought so hard to protect. As the Senate Banking Committee considers moving forward crypto market structure legislation called the CLARITY Act, I’m calling on lawmakers to close this gap before rural and small-town America pays the price.
The GENIUS Act wisely prohibited stablecoin companies from paying interest to holders, recognizing that stablecoins are meant to be payment tools, not replacements for bank deposits that fund loans to American communities. But within weeks of the law passing, Silicon Valley companies found a workaround. While the law stops stablecoin issuers from paying interest directly, their affiliates and exchange partners started offering “rewards” that work exactly like interest payments.
Without action, this scheme will drain money from rural communities and into the pockets of unregulated tech companies that have zero obligation to lend that money back to the people and places that need it. The family farms, small manufacturers, and Main Street businesses depend on community banks that understand their businesses and know their names.
In communities like the ones I grew up in, the local community bank isn’t just where you deposit your paycheck. It’s where the farmer down the road gets the loan to buy equipment for spring planting. It’s where the small manufacturer gets the line of credit to purchase inventory and meet payroll. It’s where young families get mortgages to buy their first homes.
These banks can provide credit because they have deposits. When those deposits disappear, so does the lending. The Trump Treasury Department estimates that up to $6.6 trillion could flow out of traditional banks into stablecoins. Federal Reserve economists have calculated that for every dollar that leaves banks for stablecoins, lending capacity drops by about 50 cents. Big Wall Street banks will be fine and hire teams of lawyers to help them adapt, but forgotten communities will suffer.
President Trump has shown time and again that he puts American workers and forgotten communities first. President Trump is absolutely right to champion cryptocurrency innovation. His vision for American leadership in digital assets will create jobs, drive technological advancement, and position our nation at the forefront of the financial future. But part of that leadership means ensuring innovation doesn’t come at the expense of the forgotten communities that have been left behind for too long.
We can lead the world in digital innovation while protecting the financial foundation on which rural and small-town America depends. These goals can go hand in hand.
To address this problem, Congress needs to extend the GENIUS Act’s prohibition on interest payments to include the affiliates and exchanges that are currently exploiting this loophole. Any entity offering economic benefits tied to stablecoin balances, whether they call it interest, rewards, or anything else, should be covered. This protects the intent of the law while preserving the legitimate payment uses of stablecoins.
The forgotten communities of America are watching. It’s time for Congress to remember them.
