Idaho small business depends on closing the stablecoin loophole | Opinion

Innovation and tradition go hand in hand in Idaho. Our expanding tech corridor and agricultural economy might seem opposite on paper, but both rely on the same thing: a stable financial system that offers credit, stability, and trust. Unfortunately, a loophole in the recently passed GENIUS Act threatens that balance and risks undermining the very foundation supporting our local economy.

The GENIUS Act establishes safeguards for the rapidly evolving cryptocurrency industry while still promoting innovation. That balance is important. Idaho doesn’t want to block new technologies entirely, but we also must acknowledge the risks.

One of the most glaring weaknesses in the law is that while it prohibits stablecoin issuers from paying interest directly, it leaves the back door wide open. Affiliates and trading platforms can still run “yield programs” and “rewards” incentives that serve as interest under another name.

Why does this matter? Federal regulators estimate that this loophole could divert up to $6.6 trillion from regulated banks to unregulated digital assets. Every dollar that leaves a bank’s deposit base reduces our lending capacity by about 50 cents. That means fewer loans for Idaho businesses and families. At a time when borrowing costs are already high, any disruption in lending capacity will only make credit more expensive and harder to access.

Consider the numbers. Small businesses make up 99.2% of Idaho’s enterprises, employing nearly 294,000 people. Idaho’s 25,000 farms and ranches cover more than 11.5 million acres, and they depend on community banks for seasonal operating loans, land purchases, and equipment financing. Last year alone, Idaho lenders issued over 30,000 small business loans under $100,000. If deposits flow out of our banking system into crypto platforms, those loans become harder to fund.

I’ve worked in banking long enough to see firsthand how access to credit shapes our communities. A farmer who can’t secure a loan to upgrade equipment risks falling behind. A young entrepreneur who can’t secure startup capital may relocate their small business. These are real-world consequences of policies written in Washington.

Fortunately, Idaho has leaders who understand these issues. Sen. Mike Crapo, a longtime member and former chairman of the Senate Banking Committee, has spent his career striking a balance between consumer protections and regulatory relief that keeps community banks competitive. He knows that effective policy means closing loopholes before they cause harm.

Idaho doesn’t have to choose between fostering innovation in the digital asset space and protecting our financial backbone. We can and should do both. But that requires Congress to act swiftly to extend the GENIUS Act’s prohibition on interest payments to include these so-called “reward programs” offered by stablecoin exchange platforms and affiliates of stablecoin issuers. Leaving this loophole open tilts the playing field against banks and undermines the credit system that supports Idaho families, farmers, and small businesses.

The longer Congress waits, the more difficult and costly the solution will be. Idaho deserves a financial system that fosters innovation without compromising local lending and community prosperity. It’s time to close the loophole.

Mike Morrison is the president and CEO of The Bank of Commerce and the chair of the Idaho Bankers Association.