Banking and Finance Law Daily Wrap Up, COMMUNITY DEVELOPMENT—ICBA: Interest on stablecoin holdings would be detrimental to community banks, (Dec 16, 2025)
Organizations Mentioned:Independent Community Bankers of America
ICBA releases analysis concluding that permitting interest on payment stablecoin holdings would reduce community bank lending by $850 billion.
The Independent Community Bankers of America (ICBA) has released analysis showing that stablecoins pose the threat of siphoning deposits away from community banks, which rely heavily on local deposits to fund lending to Main Street. Based on macroeconomic modeling from new industry research, ICBA has estimated that the growth of the stablecoin market resulting from payment of yield or interest on stablecoins will significantly reduce community banks’ ability to support local lending needs. Currently community banks hold $4.9 trillion in total deposits—this results in $4 trillion of lending activity to America's local communities. However, according to its analysis, if interest can be paid on stablecoin holdings, $1.3 trillion in community bank deposits could be displaced. This would result in a $850 billion decline in lending activity.
“The nation’s community banks have a proven commitment to keeping credit and banking services available to the nation’s local economies through good times and bad,” ICBA President and CEO Rebeca Romero Rainey said. “Our analysis shows that Congress must extend the prohibition on payment of yield and interest on payment stablecoin holdings to crypto exchanges, affiliates, and other intermediaries. The role community banks serve is too important to risk.”
ICBA stated that community bank lending capacity is most negatively impacted if payment stablecoin holdings are permitted to earn yield, interest, or “rewards.” ICBA’s data shows the impact on local economies of allowing crypto exchanges, affiliates, and other intermediaries to pay interest, yield, or rewards on payment stablecoin holdings, with estimates that, by continuing to allow crypto intermediaries to pay interest or yield on payment stablecoin holdings, community bank lending would reduce by $850 billion due to a $1.3 trillion reduction in the industry’s deposits. “A dramatic decline in community bank lending capacity would stifle small-business expansion and innovation, impair job creation, and hinder economic growth in communities across America,” according to ICBA.
ICBA stressed that community banks hold a larger share of small-business loans relative to regional and large banks. Small businesses are most likely to be approved for most or all of their applications for credit at community banks. Additionally, the majority of bank farm credit is provided by community banks, accounting for 81 percent of farm real estate debt held by commercial banks and 74 percent of operating debt. Community banks account for almost 90 percent of commercial bank farmland loans with original amounts of $500,000 or less. Further, community bank branches represent over 71 percent of all bank branches in rural areas and hold nearly two-thirds of rural deposits, in addition to accounting for more than 56 percent of total commercial bank branches in the 25 states with the largest rural population shares.
GENIUS Act. ICBA released this data while Congress is working on the establishment of a regulatory framework for digital assets markets. Additionally, the Treasury Department has estimated that stablecoins will grow from $300 billion to trillions of dollars by the end of the decade.
The GENIUS Act took the first step in addressing the risks posed by yield-bearing payment stablecoins by prohibiting payment stablecoin issuers from offering yield, interest, or other considerations to payment stablecoin holders, according to ICBA. The association stated that it “looks forward to continuing to work with Congress to explicitly extend this prohibition to crypto exchanges, affiliates, and other intermediaries to enable community banks to continue powering local economies across the United States.”
Companies: Independent Community Bankers of America
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