Stablecoin issuers should be restricted from providing yield-bearing opportunities to protect the legacy banking system, which issues home mortgages and small business loans, US Senator Kirsten Gillibrand said at a summit in Washington, DC.

Speaking at the 2025 DC Blockchain Summit on March 26, the Democratic senator from New York praised her state for having some of the most robust financial regulations in the world, and said they should be adopted by all financial services sectors.

According to Gillibrand, these regulations need to be applied to stablecoin issuers, whether they are regulated at the state or federal levels, to ensure compliance with existing laws and to protect consumer safety. Gillibrand then turned her attention to protecting the banking industry:

“Do you want a stablecoin issuer to be able to issue interest, probably not, because if they are issuing interest, there is no reason to put your money in a local bank. If there is no reason to put your money in a local bank, who is going to give you a mortgage?

“If there is no deposit, small banks cannot do that anymore; it will collapse the financial services system that people rely on for their businesses and mortgages,” Gillibrand continued.

Senator Gillibrand speaking at a panel during the DC Blockchain Summit. Source: DC Blockchain Summit

Related: US stablecoin bill likely in ‘next 2 months’ — Trump’s crypto council head

Gillibrand is a co-sponsor of the GENIUS stablecoin legislation — a bill introduced by Senator Bill Hagerty in February that would establish a comprehensive regulatory framework for digital fiat tokens.

On March 10, Hagerty updated the bill to include stricter anti-money laundering provisions, know your customer (KYC) requirements, financial transparency regulations, and consumer protection controls.

The Senate Banking Committee advanced the GENIUS bill in an 18-6 vote on March 13. The bill must clear both chambers of Congress in floor votes before it hits US President Donald Trump’s desk for signing.

The GENIUS Act of 2025. Source: United States Senate

Critics of the GENIUS stablecoin bill say the legislation is a thinly veiled attempt to establish a central bank digital currency (CBDC) in the United States through privatized means.

Jean Rausis, co-founder of the decentralized trading platform Smardex, argued that centralized stablecoins provide avenues for financial censorship and state surveillance that could culminate in the government’s ability to turn off money or lock individuals out of the financial system.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom