With the recent passage of the GENIUS Act earlier this year, stablecoins — digital assets used for transactions and pegged to the value of the dollar — are expected to become more commonly used as a payment tool. But do Americans fully understand the consequences of greater stablecoin usage? A new poll from Data For Progress provides some important answers; and policymakers should take notice.
In our paper Stablecoins Will Lessen Community Lending, Alex Kilander and I argue that the expansion of stablecoin usage, as envisioned by some proponents of the GENIUS Act, will likely lead to a decline in the number of small banks and in turn, less credit for households, local businesses, and farmers. Why? Because the provision in the law to prevent payment-stablecoins from paying interest/yield can be easily circumvented. Even now, some companies are exploring ways to offer rewards to stablecoin holders, emphasizing that such rewards are not technically “interest” and are offered for reasons other than merely holding the stablecoin itself.
Interestingly, when presented with this information, voters recognize the seriousness of the threat posed by stablecoins to local communities.
According to the Data For Progress poll, a sizable majority (65%) of respondents think that an uptake in stablecoin usage will likely hurt local economies. The results hold true among Democrats (71%), Independents (68%), and Republicans (58%).
The strong bipartisan response should not be considered surprising, given the important role that community banks play in rural areas across the country. Along those same lines, the results should give pause to Senators and Members of Congress, who are considering whether to tighten restrictions on companies’ ability to offer non-traditional forms of yield on payment-stablecoins.
