Big Banks Want to Freeze Innovation. History Says That's a Mistake

Source: CryptoNewsNet Original Title: Big banks want to freeze innovation. History says that’s a mistake Original Link: We have seen this fight over stablecoin yields before, and history instructs us that we should not shortchange innovation in favor of protecting incumbent interests. Right now, the banking lobby is pushing hard to upend the bargain Congress struck in the GENIUS Act last year. In that landmark bill, Congress prohibited stablecoin issuers — those who are statutorily permitted to create and offer stablecoins in the United States — from offering stablecoins that paid the holder an interest rate. In other words, a stablecoin issuer is prohibited from offering you a dollar-equivalent token that will be worth $1.04 in a year’s time. This policy choice is giving rise to non-issuer, third party offerings where users can deploy their stablecoins to earn yield. And consumers are obviously enjoying opportunities to have their cash work for them while still serving as a consumer-friendly medium of exchange.

Banking lobbyists are aggressively seeking to nip this trend in the bud. They advocate that more restrictions on stablecoins earning interest should be added to any digital asset market structure bill. In response, the current draft of the market structure bill prohibits offering yield on account of a consumer merely holding a stablecoin, instead allowing yield only based on use of stablecoins or via a third party financial instrument. Even this so-called middle ground would be a mistake — economically, historically, and as a matter of durable policymaking.