Economic growth in the U.S. is driven by thousands of independent banks that are uniquely empowered to create money. When that process is undermined, the economic success of every American is eroded.

Policy makers in Congress demonstrated their understanding of this important process during the recent debate on the GENIUS Act. The goal of the act is to establish rules and regulations around the creation of payment stablecoins — digital tokens backed by a specific value of liquid assets. Stablecoins are valuable because they are easy to exchange and track on a blockchain.

In order for payment stablecoins to play a productive role in our economy, consumers must be sure that a $50,000 payment stablecoin is actually backed by $50,000 of liquid assets. The GENIUS Act does that.

However, in addition to ensuring that payment stablecoins could be safely used as a “means of payment,” Congress also took bold action to ensure that payment stablecoins would never threaten our banking system and the creation of money by becoming a “store of value.” They did this by prohibiting payment stablecoin issuers from paying interest to the coin holders. This prevents the coin itself from becoming a “store of value,” competing with bank deposits and undermining the U.S. banking system and economic growth.

The issuers of payment stablecoins were frustrated by this provision. They know that they can sell more payment stablecoins if they can provide interest or rewards. So they immediately circumvented this prohibition by entering into agreements with third party exchanges where these coins are stored. The issuers pay fees to the exchanges, and the exchanges pay yield or rewards to the owners of the coins — which violates the law.

This scheme subverts the intent of Congress and undermines the U.S. banking system and the creation of money and economic growth by converting payment stablecoins from a “means of payment” into a “store of value.” Here’s how.

Bank deposits are “dynamic” stores of value. When money is deposited into a bank, it is insured, it earns interest, and the depositor has access to that money 24 hours a day, seven days a week. But while that money is safely in the bank, bankers can use it to make loans, thus injecting new money into the economy. Depositors have access to their deposit, but now a borrower also has access to a loan. The money has effectively doubled in the economy!

Money stored outside of a bank is a “static” store of value. While it is invested, the depositor cannot access it. When the depositor needs to access the money, the investment must be liquidated.

The last thing our economy needs right now is the movement of wealth out of dynamic stores of value in banks into static stores of value. That is exactly why Congress prohibited the issuers of payment stablecoins from paying yield on payment stablecoins. They wanted to make payment stablecoins safe and reliable, but they didn’t intend to eliminate funding for small business loans in communities throughout America. Failure to enforce this law as written by allowing stablecoin issuers to pay yield through third parties will dramatically slow the creation of money, wealth and economic growth in our economy.