Growing up on a farm taught me one lesson early: strong roots matter. A farm without deep roots in its land, in its soil, in its community seldom thrives. Likewise, our rural economy depends on financial institutions that are deeply rooted in their community, serving not just customers, but neighbors, farms, and small-town businesses.
That is why I am sounding the alarm about a loophole in the new federal law known as the GENIUS Act. The law was meant to bring some order and clarity to the fast-moving world of digital payments, but a gap in the language could end up hurting the backbone of rural communities — our local community banks.
The GENIUS Act places important new rules on issuers of stablecoins including barring them directly from paying interest to consumers on those stablecoins. But the catch—and this is the danger for small banks and rural borrowers—is that the law does not clearly prohibit third-party intermediaries, such as crypto exchanges, from offering reward-type incentives to consumers who move their funds from community banks onto crypto platforms.
In plain terms: A crypto platform partners with a stablecoin issuer and can pay rewards or yield-like payments to customers. This creates a huge competitive advantage compared to a community bank deposit. It encourages customers to pull their deposits out of local banks and park them into unregulated platforms offering higher returns. But unlike traditional banks, crypto operates without clear guardrails and deposits held in these crypto platforms are not protected by FDIC insurance. This means your investment could disappear if something goes wrong.
If community banks lose deposits, they may reduce lending, cut back on services, or in worst cases fail. Community banks stand to be hit the hardest if deposits start outflowing and they do most of the farm lending in rural America. That means if the loophole is not closed, we will see fewer loans for farmers, fewer expansion opportunities for rural entrepreneurs, fewer jobs, and overall slower growth. A recent study even found that if deposits leave banks for stablecoins, an estimated $62 billion less would be available in farm lending.
Community banks are not simply another financial institution. They are deeply embedded in their communities. They know the farmers, the feed store owners, the equipment dealers, the Main Street grocer, and coffee shop. For rural businesses and agribusinesses, where margins are tight, seasonal cash flows matter, and timely credit access is critical, the consequences can be serious. Once deposits leave our banks, they do not just come back overnight. Once a local bank’s ability to lend shrinks, it can take years to rebuild that trust and lending strength.
Congress must move quickly to close this loophole. I encourage Senator Katie Britt and her colleagues on the Senate Banking Committee to take action before irreversible harm is done to our local economy. Protect farms, small businesses, and families in rural Alabama.