President Donald Trump has publicly accused US banks of actively undermining the GENIUS Act, a legislative framework passed by Congress in July to regulate stablecoins. The confrontation marks a significant escalation in the battle over market structure, with the President warning that banking sector resistance could cede the digital asset landscape to China and other nations.

"The Genius Act is being threatened and undermined by the Banks, and that is unacceptable — We are not going to allow it," Trump posted on Truth Social on Tuesday. He further emphasized the urgency of the situation, stating, "The U.S. needs to get Market Structure done, ASAP." The President framed the issue as a direct threat to American competitiveness, noting that banks are currently "hitting record profits" while simultaneously blocking a crypto agenda that he claims is essential for national economic dominance.

The Yield Payment Impasse

The core of the legislative deadlock lies in the treatment of stablecoin yield payments. The GENIUS Act, which Trump has touted as a crowning achievement to attract crypto firms to the US, establishes a regulatory path for stablecoin issuers but explicitly bans them from directly offering yield payments to holders. While third-party platforms, such as crypto exchanges, remain permitted to offer yield to users holding stablecoins, banking groups argue this creates a dangerous legal loophole.

Banking lobbyists are pushing for the Senate's version of the bill to include a comprehensive ban on all stablecoin yield payments. Their primary concern is financial stability; they argue that allowing yield on stablecoins would siphon capital from traditional bank accounts into digital assets, potentially destabilizing the broader banking system. This stance has created a sharp divergence between the crypto industry and traditional financial institutions.

Lobbying War and Legislative Stalemate

The impasse has effectively stalled the legislative process. The House passed its version of the bill, the CLARITY Act, in July, securing 78 Democratic votes alongside Republican support. However, the Senate Banking Committee has postponed a markup on the legislation, a move that occurred after major industry player Coinbase withdrew its support in January. Coinbase's withdrawal was a direct response to the banking lobby's efforts to expand yield restrictions, which the exchange and other crypto groups view as detrimental to the industry's growth.

Despite three meetings held at the White House this year between crypto and banking groups, no deal has been reached. The political stakes are now high, with the administration seeking to pass the bill as a policy win ahead of the November midterms. Crypto lobbying groups have mobilized significantly to support this effort, raising more than $200 million to back industry-friendly candidates in the upcoming election.

Path Forward: The House Bill as a Fallback

With the Senate gridlocked, pressure is mounting on Republican leadership to force a vote on the House-passed legislation. Representative French Hill, chair of the House Financial Services Committee, suggested a pragmatic solution on Tuesday. He recommended that the Senate adopt the language of the CLARITY Act if they cannot advance their own version.

"If the Senate can't come to a straightforward conclusion here, I recommend they use the language that we have in the House-passed Clarity Act with 78 Democratic votes on it, and use that as the solution," Hill said. He highlighted that the House bill successfully reasserted the definition of stablecoins as payment devices rather than investment devices, a distinction that excludes direct interest payments per se. As the market sentiment remains in extreme fear, with the Crypto Fear & Greed Index sitting at 10/100, the resolution of this regulatory battle could serve as a critical catalyst for market stability and US leadership in the digital asset sector.

Source: CoinTelegraph | Analysis by Rumour Team