July 19, 2025

Treasury warns stablecoin loophole could threaten $6.6 trillion in bank deposits

Federal Reserve warns $3 trillion could flee banks into stablecoins

📋Public Policy💰Economy💡Technology

The GENIUS Act, S.1582, was sponsored by Sen. Bill Hagerty. The Senate passed the bill on June 17, 2025, and the House passed it on July 17, 2025. The president signed it into law on July 18, 2025.

The law creates a federally qualified nonbank stablecoin issuer category. Issuers must back each coin with one-to-one reserves held in high-quality liquid assets. Issuers with more than $100 million in coins must disclose reserves and submit annual audits. The statute sets strict standards for what assets count as reserves.

The law lets federally qualified issuers access Federal Reserve services under a dual federal-state supervision model. That gives the Fed a formal oversight role alongside state regulators. Nonbank issuers could get some operational supports similar to banks while remaining outside full banking charters.

Treasury modeling estimated stablecoins could pull as much as $6.6 trillion from bank deposits in stress scenarios. Industry groups and the Bank Policy Institute presented similar scenarios showing large uninsured deposit outflows. Banks, regulators, and the Fed warned this could shrink traditional liquidity and change monetary-policy transmission. Smaller banks would likely face the biggest funding pressure and tighter lending.

📋Public Policy💰Economy💡Technology

Test Your Knowledge

The GENIUS Act includes dual-supervision rules that may allow nonbank stablecoin issuers access to Federal Reserve facilities.

On what date did the House of Representatives pass the GENIUS Act, prompting bank warnings about stablecoin risks?

True or false: The FDIC insurance limit per depositor is $250,000.

If insured deposits erode due to stablecoin outflows, banks may respond by tightening their lending standards.

What primary risk did major banks highlight following passage of the GENIUS Act?

5 more questions available

Upgrade to Premium to access all practice questions and unlock advanced quiz features.

Upgrade to Premium

These questions are part of the Treasury warns stablecoin loophole could threaten $6.6 trillion in bank deposits topic. Master this topic by completing the quiz or exploring each question in detail.

Ready to test your knowledge?

Take the full quiz to master this topic and track your progress.

Start Quiz

People, bills, and sources

Donald Trump

President of the United States

Bill Hagerty

U.S. Senator

Jerome Powell

Federal Reserve Chair

Janet Yellen

Treasury Secretary

Major banks (JPMorgan Chase, Bank of America, Citigroup)

Financial institutions

What you can do

understanding

Read the GENIUS Act text and agency statements.

Read the GENIUS Act text and related Treasury and Federal Reserve statements to understand new rules. Watch for agency rulemaking and formal guidance that will set implementation details. Sign up for agency email lists to get notices about proposals and comment periods.

civic action

Submit comments and contact your senators.

Submit public comments when agencies open rulemaking via the Federal Register to shape how regulators treat stablecoins and banks. Call your senators at 202-224-3121 to urge them to seek balanced rules that protect consumers and preserve banking services.

Hi, I'm calling as a constituent to ask you to seek balanced rules for stablecoins and banks that protect consumers and preserve banking services.

Key points to mention:

The House passed the GENIUS Act on July 17, 2025
Major banks warned the bill could trigger large deposit shifts
The Treasury estimated up to $6.6 trillion in potential deposit outflows under certain scenarios
The law creates reserve requirements and a dual-supervision framework for stablecoin issuers
Policymakers warn these shifts could change deposit insurance flows and monetary policy transmission

How this impacts constituents: When large amounts of money move from traditional banks to stablecoins, it can affect deposit insurance, banking services, and the overall financial system. We need rules that protect consumers while allowing innovation. Without balanced regulation, consumers could lose protections or face instability.

Questions to ask:

Will you review agency rulemaking on the GENIUS Act to ensure consumer protections?
How will you ensure deposit insurance and banking services are preserved?
What oversight will you provide on Treasury and Federal Reserve implementation?

Specific request: I want you to submit public comments when agencies open rulemaking via the Federal Register and seek balanced rules that protect consumers and preserve banking services. Please ensure deposit insurance protections are maintained.

Thank you for your time.

practicing

Check deposit protections and join consumer groups.

If you hold deposits or use stablecoin-linked products, ask your bank or provider whether funds are insured or commingled with digital-asset programs. Consider joining consumer groups to press for clear deposit protections and to follow FDIC and FinCEN guidance.