Alabama Senator Keith Kelley is sounding the alarm about the GENIUS Act, a new law that could seriously hurt small, rural banks. He’s worried the law might unintentionally drive away customers and their deposits.
The Problem: Deposit Flight
The concern is about how the law defines “comparable supervision.” If regulators aren’t strict enough, crypto companies could offer better returns on deposits than traditional banks. This could tempt people to move their money, leaving rural banks high and dry. One estimate suggests a whopping $6.6 trillion in deposits could move to crypto if the law is interpreted loosely.
A Rural Banking Crisis?
This is a big deal for small banks. They operate on small profit margins and rely heavily on local deposits to lend money to farmers, small businesses, and families. If a significant amount of money leaves these banks, they could be forced to:
Farmers and small businesses are particularly vulnerable, as they often rely on the personalized service and flexible loan terms offered by local banks.
What Happens Next?
The GENIUS Act isn’t active yet. The US Treasury and the Federal Reserve are still working on the rules that will make it operational. They’ve asked for public input, and many banking groups and lawmakers are pushing for clearer rules to prevent the potential crisis Senator Kelley describes.
While supporters say the law will bring more clarity to the stablecoin market, opponents argue the details are crucial. The way the law is implemented will determine whether it helps or harms rural communities.