Statement for the Record to the Senate Banking Committee on GENIUS ACT

The American Bankers Association (ABA) appreciates the opportunity to share our perspective on the proposed payment stablecoin legislation, S. 919, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, and we applaud the Committee's efforts to establish a regulatory framework for payment stablecoin. Ultimately a durable regulatory framework must balance the potential for improving a customer's payment experience with the need to limit negative economic consequences, promote financial stability, and guard against consumer protection risks. Such a framework has the potential to spur innovation, and the banking industry is ready to participate.

Stablecoin is an area of particular interest to our members, given the token's similarity in use to commercial bank money. Despite the name payment stablecoin, which implies value transfer, there is strong evidence that payment stablecoins will also serve as a store of value. Take Tether, for example; as of December 31, 2024, it held about $143 billion in reserves, with about 80% of these in US T-bills and just 0.09% in cash and bank deposits. The presumption is that these are funds that moved from Tether holders' bank deposits to Tether. If nonbank payment stablecoins scale, it is reasonable to expect the same dynamic to occur – an outflow of funds from bank deposits to the reserves backing these stablecoins. This would be similar to the outflow experienced with the development of money market mutual funds. We urge the Committee to avoid establishing a framework that disintermediates the banking industry by incentivizing a flow of deposits out of community banks and into payment stablecoins.

We appreciate that the bill codifies the repeal of SEC Staff Accounting Bulletin 121, offers a path for banks to issue payment stablecoins, and acknowledges the authority of banking institutions to issue digital assets that represent deposits (i.e., tokenized deposits), otherwise use distributed ledgers for recordkeeping, and provide custodial services for payment stablecoins and their reserves. Banks are responsibly innovating in these areas and subject to a robust regulatory framework that ensures the safety and soundness of their operations.

In addition, we noted and support several changes in the reintroduced bill that strengthen the proposed regulatory framework, especially the prohibition on interest, confirmation that payment stablecoins are not eligible for deposit insurance or a government backstop, and provisions around the Bank Secrecy Act and anti-money laundering rules. We thank the Committee for making these and other important improvements.

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