The GENIUS Act was intended to establish guardrails for the use of payment stablecoins, which are digital assets designed to maintain a stable value and function like cash in the digital economy. But as currently implemented, the law contains a serious loophole that threatens the financial well-being of local communities, small businesses, and the community banks we all rely on.

The law rightly prohibits stablecoin issuers from offering interest or yield to people who invest in stablecoins. The goal was to prevent these products from being marketed like investment vehicles, but some crypto platforms are using a workaround. They are partnering with third parties and effectively offering consumers high incentives to hold their money on crypto platforms instead of in traditional banks. This results in consumers being potentially lured away from safe, regulated banking institutions and drawn into risky, less regulated financial ecosystems that the FDIC does not insure.

This matters deeply to the Phoenix business community.

Community banks are the financial backbone of many local economies. They make it possible for a first-generation entrepreneur to open a small business, for a working family to buy their first home, and for a nonprofit to keep its doors open. However, to lend, banks need deposits, which is especially important for community banks that are significantly more dependent on deposits than big Wall Street banks are to make loans. If customers are incentivized to move their funds to high-yield crypto platforms, community banks lose access to the capital they need to reinvest in the neighborhoods they serve.

And this issue doesn’t affect all communities equally.

Here in the Greater Phoenix area, and across the country, many underserved communities rely heavily on community banks. These institutions often provide more personalized service and are more willing to work with borrowers who may not meet the financial requirements favored by large national banks. Draining deposits from these banks in favor of speculative digital platforms undermines their ability to meet local credit needs. That hurts everyone, but it especially hurts small businesses and marginalized communities already facing systemic barriers to economic opportunity.

Worse still, this loophole directly undermines the goals of the Community Reinvestment Act, a federal law that ensures banks meet the borrowing needs of their communities, particularly in low- and moderate-income neighborhoods. Crypto platforms are not subject to the CRA. They are not required to reinvest in the communities where they do business. They are not held accountable to ensure their operations support economic equity. And yet, under this loophole, they are being allowed to siphon away the very deposits community banks need to meet CRA goals.

It is crucial that the Senate Banking Committee members, especially Senator Ruben Gallego, act to close this loophole. Congress passed the GENIUS Act to promote financial stability, not to create backdoor channels that benefit unregulated crypto firms at the expense of our communities.

Michael Mazzocco is a small business owner, community advocate, and candidate for Phoenix City Council District 4.