Maryland’s economic resilience is rooted in the strength of our local communities—from the family farms of the Eastern Shore to the small businesses that anchor Baltimore’s suburban neighborhoods. But in today’s economy, where technological innovation and disruption move at breakneck speed, that foundation is under threat.
There is a loophole in federal cryptocurrency policy that prioritizes special interests over the financial stability and integrity of our nation, and if left unaddressed, could jeopardize our future prosperity.
Having spent over 13 years at the Conference of State Bank Supervisors, the front office for state banking regulators from all 50 states, I know how devastating gaps in the legal framework for financial services can be. We cannot allow the crypto market structure bill, now under consideration by the U.S. Senate, to move forward without addressing the "yield loophole" and the glaring lack of ethics guardrails for public officials.
While the GENIUS Act, passed last year, correctly identifies that stablecoins should be payment instruments rather than speculative investments, it contains a massive flaw: the “yield loophole” allows crypto trading platforms to pay interest or rewards to customers who store stablecoin holdings with them. By partnering with third-party platforms to offer these high-yield rewards, crypto companies are bypassing clear congressional intent.
This is not just a technicality; it is a direct threat to rural Marylanders and the community banks they rely on. Community banks provide nearly half of all small loans to businesses across the country. Their share of small business lending is much higher in the smallest loan size categories and in rural markets like Maryland’s 1st Congressional District. Community banks turn local deposits into the credit that allows a restauranter in Baltimore to renovate or a mechanic in Salisbury to expand. Right now, community banks are the only form of our current capitalism that knows your name. If reward-bearing stablecoins siphon those deposits away, we could see a massive contraction in local lending—estimated at up to $110 billion nationwide. For Maryland’s 600,000 small businesses, which employ 1.2 million of our neighbors, this loss of capital would be catastrophic.
Beyond economic stability, we face a crisis of legislative and regulatory integrity. Current law leaves the door open for unethical practices, as neither the GENIUS Act nor the House-passed CLARITY Act contain basic anti-corruption provisions. Right now, there is nothing stopping government officials—from the President on down—from influencing crypto regulations for personal gain. Crypto and stablecoins are here to stay. This industry has massive potential for innovation but that potential is being weighed down by grift and corruption instead of a durable framework that benefits Marylanders.
The stakes here are truly unprecedented. President Trump and his family have built a sprawling crypto empire that accounts for an estimated 73% of his net worth. While his administration drafts the rules for this industry, the President is simultaneously promoting his own stablecoins and memecoins. This creates what Senator Elizabeth Warren has called a "superhighway for corruption" where foreign governments are able to purchase vast amounts of cryptocurrency affiliated with public officials to gain political leverage.
Individual crypto investors are exposing themselves to a market rife with insider transactions that erode trust in the overall market and put their investments at risk.
The solution is clear. First, we must remove the yield loophole to create a fair and balanced marketplace. Second, we must ban all government and elected officials, including the President and members of Congress, from profiting from investments in cryptocurrency[JC1.1]. This means prohibiting them from issuing, sponsoring, or profiting from crypto tokens. We cannot have the referees betting on the game while they write the rulebook. Banks have strict restrictions on conducting transactions with insiders and affiliates. The same rules should apply to crypto industry insiders.
I want to praise Sen. Angela Alsobrooks for her steadfast leadership regarding crypto market regulation. She has consistently fought for the interests of Marylanders over powerful lobbyists. Now, I urge Senator Alsobrooks and her colleagues in the Senate to ensure that any final crypto market legislation prohibits third-party reward schemes that drain deposits away from our community banks and enact strict ethics rules that prevent public officials from profiting off their positions.
Maryland’s small businesses and the integrity of our democracy deserve nothing less than a level playing field and a government that isn't for sale.
Dan Schwartz
Schwartz is a candidate for Congress in Maryland’s 1st congressional district.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
