Alabama State Senator Keith Kelley is raising concerns about the federal stablecoin bill, the GENIUS Act, signed into law by the U.S President Donald Trump on July 18. In an op-ed, Kelley warned that a loophole in the law could severely impact rural economies and community banks in Alabama.
In the op-ed for 1819 News, Kelley shared that the law may allow cryptocurrency platforms to offer financial rewards or yields. This could encourage people to pull deposits from small community banks and move their money into crypto platforms. Unlike big banks, community banks rely heavily on local deposits to provide loans to families, farmers, and small businesses.
“If those deposits decrease, their ability to offer loans to individuals, families, and small businesses will be significantly restricted,” Kelley said. He added that “For our rural farming communities in particular, where margins are thin and seasonal cash flow is critical, the loss of a trusted lending partner could be devastating.”
Although the GENIUS Act was signed in July, it will not take effect until the U.S. Treasury and Federal Reserve finalize regulations. The Treasury has already begun seeking public input, focusing on preventing illicit activity.
Supporters of the law say it will bring innovation and regulatory clarity for stablecoin issuers. However, critics argue the bill contains loopholes that could give foreign issuers an advantage and allow crypto firms to bypass restrictions.
Former CFTC chair Timothy Massad noted that the law does not clearly define what qualifies as a “comparable” regulatory regime for foreign stablecoin issuers. Banking groups also warned that the loophole could trigger as much as $6.6 trillion in deposit outflows from traditional banks.
Kelley urged regulators not to let cryptocurrency companies act like banks without following the same rules, calling it “regulatory arbitrage” that puts rural families and local economies at risk.