Following the enactment of the GENIUS Act,
Stablecoins pegged to the U.S. dollar have been used primarily for trading cryptocurrencies and other digital assets. The GENIUS Act may expand usage of stablecoins into mainstream commerce.
"Stablecoins represent a revolution in digital finance," said Treasury Secretary Scott Bessent on July 18. "The dollar now has an internet-native payment rail that is fast, frictionless, and free of middlemen. This groundbreaking technology will buttress the dollar's status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for U.S. Treasuries, which back stablecoins."
Before the Wyoming Blockchain Symposium on Aug. 20, 2025, Federal Reserve Board Governor Christopher Waller characterized "stablecoins and other digital assets" as the latest stage in a technology-driven revolution of payments.
Despite the fact that banks participate in over 90% of total payments in the U.S., they were, and continue to be, ignored during the current love affair with stablecoins. Bank deposits are excluded from the definition of stablecoins in the GENIUS Act and from the definition of "digital commodities" under the proposed CLARITY Act. The principal regulatory agencies are required to issue implementing regulations for stablecoins no later than Jan. 18, 2027.
By contrast, the three principal regulators walked away from their previous advance notice and nonobjection of proposed crypto activities requirements, which were acknowledged in a Federal Deposit Insurance Corporation, or FDIC, Inspector General report to be time-consuming, expensive and unsuccessful. The current regulatory message to the banking industry is you can engage in permitted crypto activities as long as they are conducted in a safe and sound manner. Compliance with this standard is to be evaluated in normal safety and soundness examinations without any
As enthusiasm for stablecoins and the underlying distributed ledger technology grows,
There is no legal, policy or technological reason why the banking industry should not participate in the technology-driven revolution of payments. To the contrary, they should be the principal focus of this revolution. To this end, however, the administration and regulators must immediately acknowledge the role banks should continue to play in this revolution concurrently with the guidance and rules to be provided to stablecoin issuers and their related providers. It would be unfair and imprudent to provide stablecoin issuers a "head start" in commencing the payments revolution by providing them — and not banks — with prudential standards.
A bill on reciprocal deposits passed the committee unanimously, while another measure on custodial deposits passed by a wide, bipartisan margin.
Banks have been accepting customer deposits and facilitating payments in the U.S. since the 18th century. These services evolved into new payment services and products using the most modern technology available at the time. Facilitating customer payments continues to be an inherent aspect of banking.
Banks dwarf the largest stablecoin issuers in transaction dollar value. The daily dollar value of payment services provided by U.S. banks (as measured by payment services provided by Federal Reserve banks) in 2023 was $6.384 trillion. In contrast, as reported in Coinlaw.io, the total value of transactions processed for all stablecoins in 2024 was $5.7 billion or $21.9 million per business day.
Measured by history, experience, and volume of transactions processed, banks are in the best position to adapt their payment practices to distributed ledger technology within established bank systems. Instead of resisting stablecoins or passively allowing them to drain deposits and business away, the industry and regulators should embrace the new technology, adapt it to payment services, hire people with experience with the new technology, and adopt revised policies and procedures to address new and modified risks involved in relying on the new technology. Deposit-token-specific regulations and guidance should be issued by Jan. 18, 2027.
The administration, Congress and the bank regulators should balance their enthusiasm for stablecoins by encouraging and facilitating the banking industry's adoption of distributed ledger technology for payments and settlements. The dominant volume of payments flowing through the banking system is simply too large to ignore.
Regulatory characterizations of deposit tokens prior to the GENIUS and proposed CLARITY acts have been muddled and confusing, referring to them as stablecoins (OCC), dollar tokens (Federal Reserve) or a form of crypto activity (FDIC). None of these accurately describe deposit tokens. The regulators should immediately state the obvious — a deposit token issued on a distributed ledger by a federally regulated bank that represents a claim by the token holder on U.S. dollar deposits maintained at the related bank and accounted for as a deposit liability should be treated, for all purposes, as a bank deposit.
The regulators should actively collaborate with working bank groups to provide prudential guidance by a certain date regarding the type of distributed ledger that would be consistent with safe and sound banking practices, e.g., single bank, shared (permissioned or permissionless) ledgers, interoperability protocols among ledger platforms, on-chain or off-chain settlements and how to ensure full BSA/AML/OFAC compliance.
Distributed ledger technology, made popular by bitcoin and other cryptocurrencies, has introduced opportunities for faster, cheaper and more robust payment services. Banks and their regulators should embrace and encourage use of this technology to improve banking services and prevent disintermediation of deposits into stablecoin reserves.
