By Al Pedigo, Kentucky Agricultural Development Board
Kentucky farmers know a thing or two about risk. We live with it every season. A late frost, a summer drought, rising fuel costs, or falling commodity prices can change everything overnight. That is why rural communities depend so heavily on local relationships and stable institutions — especially our community banks.
For generations, Kentucky’s community banks have helped keep family farms like ours operating through both good years and bad ones. They understand agriculture because they live here too. They know the difference between a temporary setback and a long-term problem. And when farmers need financing for land, equipment, seed, livestock, or operating expenses, these banks are often the first people we call.
That local banking model works because deposits made in our communities stay in our communities. Local banks take those dollars and turn them into farm loans, home mortgages, and financing for small businesses that support rural Kentucky. But today, that system faces a growing threat from a loophole in Washington, DC that Congress needs to close before it harms communities like ours.
The issue involves something called “stablecoins,” a type of cryptocurrency designed to function more like digital cash. Congress recently passed the GENIUS Act to establish rules for stablecoins and encourage innovation in financial technology. Importantly, lawmakers prohibited stablecoin issuers from paying interest to customers because they recognized these products should function as payment tools — not as replacements for traditional bank accounts.
Unfortunately, companies have already started finding ways around that restriction.
While stablecoin issuers technically cannot pay interest directly, affiliated exchanges and digital platforms are now offering so-called “rewards” or yield programs tied to stablecoin balances. In plain English, that is simply interest by another name. Congress prohibited it directly, but companies are attempting to do it indirectly anyway.
Some people may see this as a Wall Street or tech industry issue. Out here in rural Kentucky, it is much more personal.
According to analysis from the U.S. Treasury Department, as much as $6.6 trillion in deposits nationwide could move out of traditional banks and into stablecoins if these programs continue to grow. Research from the Federal Reserve Bank of Kansas City found that for every dollar that leaves the banking system, lending capacity drops by roughly fifty cents.
That matters deeply in places like Allen County and other rural communities across the Commonwealth.
When local banks lose deposits, they have fewer resources available to lend. That could mean fewer operating loans for farmers, fewer mortgages for young families, and fewer opportunities for small businesses trying to grow on Main Street. Rural communities would feel the pain first because community banks are often the only financial institutions actively serving these areas.
Unlike community banks, stablecoin companies have no obligation to reinvest in Kentucky communities. They are not financing tractors, livestock barns, or local businesses. Once those deposits leave our towns for unregulated digital platforms, there is no guarantee they will ever come back to support local economies.
I am not opposed to innovation. Agriculture itself depends on innovation. Farmers adopt new technology every year to improve efficiency and productivity. But innovation should not come at the expense of the rural communities that feed this country.
Congress can fix this problem by simply clarifying that interest-like rewards tied to stablecoins violate the intent of the law, regardless of whether they come directly from issuers or through affiliated platforms. That would protect consumers, preserve fair competition, and help ensure community banks can continue supporting rural America. Unfortunately, the version of the CLARITY Act that passed out of the Senate Banking Committee does not fully close this loophole.
Kentucky farmers do not ask for special treatment. We simply want a level playing field and policies that strengthen, rather than weaken, the communities we call home.
Congress must not pass the CLARITY Act until it completely closes the stablecoin loophole before rural America pays the price.
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Al Pedigo is a longtime farmer from Scottsville, Kentucky, who currently serves on the Kentucky Agricultural Development Board.
