By Ray Birch
DOVER, Del.—If Congress closes the yield-on-stablecoin loophole in the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), credit unions could be very well placed to capture the next wave of digital-dollar innovation.
But if the loophole remains open, the risk of disintermediation for credit unions is real, one expert says.
“Two-hundred-fifty thousand letters to the Senate is a clear signal that consumers want safe, well-regulated ways to participate in the emerging stablecoin ecosystem — and credit unions are best positioned to deliver solutions for these consumers,” said Kian Sarreshteh, CEO of InvestiFi, a fintech helping credit unions prepare for the stablecoin shift. “The big clause of contention today is the GENIUS Act stating yield cannot be paid to consumers on stablecoin balances. We see the major exchanges skirting this clause by branding yield as a ‘reward’… that’s one of the major topics right now in Washington.”
What’s Going On — And Why It Matters To Credit Unions
When the GENIUS Act was passed in July 2025, it established the first comprehensive federal framework for U.S. dollar-backed “payment stablecoins.” Among its many provisions, the Act prohibits “payment stablecoin issuers” from paying interest or yield on those stablecoin balances.
However, Sarreshteh argues a major loophole remains: non-bank platforms, wallets and exchanges are still offering yield—or “rewards”—on stablecoin balances by relying on structures that the statute didn’t explicitly cover. For example, rather than calling it “interest,” the yield is branded a reward or a share of lending on the stablecoins.
That loophole matters to credit unions because it threatens deposit flows and member relationships.
“If exchanges like Coinbase could pay yield on stablecoin balances, then the thought process becomes: what do you really need your credit union for at the end of the day?” Sarreshteh explained.
In short, if consumers begin to hold stablecoins on non-deposit platforms and earn yield there, traditional depository institutions — including credit unions — could see savings outflows, less stickiness, and weakened member engagement, Sarreshteh said.
What Happens If the Loophole Is Closed — A Credit Union Advantage
If Congress or regulators act to close the loophole, the upside for credit unions is significant:
- Sarreshteh said credit unions could emerge as one of the few trusted issuers/custodians of payment stablecoins under the regulated “permitted payment stablecoin issuer” (PPSI) framework. The GENIUS Act already allows federally-insured credit unions—or their CUSO subsidiaries—to issue or custody stablecoins.
- With non-banks/exchanges unable to offer yield on stablecoins—or required to route those balances into insured deposits—credit unions would have the structural advantage of being able to offer yield via deposit accounts (checking/savings) behind the scenes. “When a member receives a stablecoin payment, we can auto-convert the stablecoin into a high-yield, NCUA-insured deposit account, so, the member can enjoy ‘stablecoin yield’ in the form of a traditional high-yield checking or savings account … and the credit union can enjoy growing deposits on its balance sheet,” Sarreshteh explained.
- That means credit unions could tap into the “digital-dollar rails” opportunity — capturing stablecoin flows, offering member-friendly payout mechanisms, and re-asserting their traditional role as the depository institution—vs. being displaced by fintech/exchanges.
- By locking yield generation to insured financial-institution deposit channels, credit unions also preserve their core business of taking deposits and making loans — a priority flagged in numerous credit-union advocacy documents, Sarreshteh said.
- From a timing and strategy perspective, credit unions that get ahead of this can design member offerings now—payments, stablecoin receipt-to-deposit conversion, yield-linked savings—so they are ready if/when the loophole is closed, Sarreshteh said.
Sarreshteh emphasized that closing the loophole would tilt the competitive playing field in favor of credit unions.
Kian Sarreshteh
What Happens If It Isn’t Closed — Credit Unions Face Risk
On the other hand, if the yield-on-stablecoin loophole stays open, the downside for credit unions could be substantial, Sarreshteh explained.
- Non-bank platforms and crypto exchanges could continue to offer high-yield or reward-type stablecoin balances, which may attract deposit-like funds out of credit unions and into the wallet/crypto world. “I’ve seen as high as like 60 % yield … and on more reasonable ones between 5–10 %,” Sarreshteh said, citing examples.
- If consumers shift more of their savings behavior to crypto/exchanges (with stablecoin yield), credit unions would see a smaller savings/investment relationship and possibly weaker deposit base — limiting their ability to lend and grow organically.
- The disintermediation risk is real: as credit-union member behavior shifts toward new rails, if the credit union isn’t offering comparable functionality (payments in/out, stablecoin conversion, yield on digital-dollar balances), the member relationship could degrade, Sarreshteh noted.
- Further, if yield becomes the defining benefit of stablecoin holdings—and credit unions can’t offer comparable yield unless the regulations change—the credit union value proposition could be challenged relative to fintech/crypto platforms, Sarreshteh said.
Where Things Stand – When Might The Decision Come?
The question of closing the yield loophole is currently under active discussion in Washington, Sarreshteh said.
“We indicated … the final decision on this potential loophole being closed is going to sit with Treasury and the initial comment period is actually already finished. So, the first half of next year is when we’re expecting to see more clarity on this and then hopefully by the end of ’26 that … this loophole would actually be … closed and signed into law,” Sarreshteh said.
What Credit Unions Should Do Now
Given the upside and the risk, credit unions should act proactively, even while the regulatory outcome remains uncertain:
- Scan the member base and product set — How many members are already holding stablecoins (or crypto) via non-CU wallet platforms? How engaged is the CU in payments-rails innovation?
- Explore partnerships — Platforms like InvestiFi are building the stablecoin/USD deposit conversion rails. Credit unions should evaluate whether they can plug in.
- Design member-facing use cases — For example: receive stablecoin from overseas/remittance, auto-convert to high-yield deposit, pay merchant in stablecoin or USD seamlessly.
- Prepare for different regulatory outcomes — If the loophole is closed, move fast to launch; if not, consider the CU competes vs. platforms offering “reward” yields and how to retain deposit relationships.