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America’s Credit Unions, the American Bankers Association, and a coalition of community financial institutions have sent a joint letter to the US Senate demanding that lawmakers close a loophole in proposed digital asset legislation that could allow payment stablecoins to offer yields. The coalition argues that if stablecoins start paying interest-like rewards, the resulting deposit flight could cripple local lending across the country.
The letter, sent on January 12-13, 2026, references Treasury estimates suggesting that as much as $6.6 trillion in deposits could be at risk. That represents a massive chunk of the capital that credit unions and community banks rely on to fund home loans, small business credit, and other local financial services.
The loophole that has traditional finance sweating
The target of the coalition’s ire is the Digital Asset Market Clarity Act, designated H.R. 3633. The bill is designed to provide regulatory structure for digital assets, but the credit union lobby sees a dangerous gap in it: the legislation could permit stablecoin issuers to offer yields, rewards, or other interest-like inducements to holders of payment stablecoins.
The GENIUS Act, which was enacted in July 2025, already established some guardrails. It prohibits stablecoins from being treated as deposits and restricts their issuance by insured credit unions or banks. But the coalition argues that those protections don’t go far enough if a separate piece of legislation opens the door to yield payments through the back entrance.
Why credit unions are particularly vulnerable
Credit unions and community banks operate on a fundamentally different model than larger institutions. They depend heavily on local deposits to fund local loans. Large banks have diversified funding sources, access to wholesale markets, and balance sheets that can absorb some deposit outflows. Community institutions don’t have that luxury. A meaningful shift of deposits into stablecoins could hit them disproportionately hard, potentially reducing the availability of home loans and small business credit in rural and underserved areas.
What this means for crypto investors
If Congress does close this loophole, it would effectively cap the utility of payment stablecoins. They’d remain useful for transactions and settlements, but issuers wouldn’t be able to compete with traditional savings products by offering yield.
The timing matters too. The Senate is currently considering broader legislation for digital asset market structure. The credit union coalition’s letter is essentially asking lawmakers to amend H.R. 3633 before it moves forward, which means this debate could shape the entire regulatory framework for how stablecoins operate in the US for years to come.
For stablecoin issuers like Circle and Tether, the outcome of this legislative fight will directly shape their product roadmaps. Circle in particular has been positioning USDC as a compliant, US-friendly stablecoin. A ban on yield payments would constrain its ability to differentiate from competitors, while potentially reinforcing its role as a pure payments instrument rather than a savings vehicle.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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