January 13, 2026
Committee on Senate Banking, Housing, and Urban Affairs
United States Senate
Washington, DC 20510
Dear Members of the Senate Banking Committee:
NCRC writes to express our concern about the recently released digital asset market structure legislation scheduled for markup this Thursday. While NCRC shares the goal of regulatory clarity, the bill does not adequately address the previously identified principles for an ethical and transparent market structure for cryptocurrencies.[1] The legislation as currently drafted poses considerable risks for low- and moderate-income (LMI) households and communities by fostering regulatory arbitrage, and failing to do enough to prevent significant deposit flight from traditional banks and a resulting decline in lending and community development financing.
NCRC is a coalition of 700+ grassroots organizations that create opportunities to build wealth in underserved communities through affordable housing development, small business support, and workforce training. We work with banking institutions to fulfill their obligations to the Community Reinvestment Act (CRA), which requires reinvestment of deposits in LMI communities through lending, bank branch openings, and financing of needed community development projects.
1. Current Draft Weakens Investor Protections and Creates Loopholes
NCRC is concerned that the current draft moves in the wrong direction by narrowing the traditional securities law framework rather than closing the regulatory gaps. NCRC has previously said in our comment letter regarding the responsible development of digital assets that the Howey test is a valuable instrument established by legal precedent for determining when a digital asset is an investment contract and treated as a security with the full protections that come with SEC oversight.[2]
The new “ancillary asset” category could further expand regulatory gaps as digital assets are being adopted by traditionally underserved communities, raising the risk that volatility will worsen economic inequality. The draft’s ancillary-asset framework relies heavily on self-certification that becomes effective after 60 days unless the SEC acts within that window. In our view, a market structure bill should tighten accountability and enforceable oversight, not create off ramps that make it easier to label investment-like products as something else in order to leave investors exposed to fraud, market abuse, and instability.
2. DeFi Must Not Become a Loophole for Illicit Finance
NCRC is concerned with how the current Senate crypto market structure bill requires a voluntary review of decentralized finance (DeFi) trading protocols, and the potential this creates for anti-money laundering and consumer protection blind spots. Many DeFi ecosystems still have companies and people who design, market, and profit from the product—through front-end websites and apps, governance control, token issuances, developer teams, or affiliated market-makers. If the bill doesn’t clearly assign responsibility to these participants, it risks building a pathway for bad actors to move money, evade sanctions, and launder money while leaving regulators and law enforcement in the dark. A market structure framework should not reward opacity and regulatory gamesmanship that let sophisticated firms operate without the basic obligations that apply everywhere else in finance.
These gaps will also hit LMI communities first and hardest. When platforms aren’t required to implement meaningful safeguards, communities see more fraud, hacking losses, and scam-driven “investment” pitches. These predatory schemes are often amplified through social media and targeted at households with less room to absorb losses. NCRC supports innovation, but innovation must come with clear accountability and transparency that includes anti–money laundering controls and consumer protections where DeFi meets the real economy. If Congress creates a new crypto rulebook, it must not become a loophole that weakens financial integrity or shifts the costs of misconduct onto consumers and communities.
3. Serious Threat of Deposit Flight and Lack of Community Development Obligations
The legislation creates no obligation for nonbank stablecoin issuers to invest in communities. Digital-asset intermediaries hold billions of assets but have no comparable public-benefit mandate. For example, as of July 2025, the two largest U.S. stablecoins – USDT and USDC – collectively managed more than $220 billion in circulating supply, but none of those reserves supported mortgage lending, small-business financing, or local community development.[3] These funds effectively become fenced off from the real economy, held in Treasury-only reserves or custodial accounts rather than lent back to homebuyers and entrepreneurs.
Stablecoins also present a unique risk to regional and community banks and LMI communities. The US Treasury’s Borrowing and Advisory Committee (TBAC) estimated that as much as $6.6 trillion in deposits are could move from the traditional finance sector into the stablecoin market.[4] Multiple organizations, such as the Independent Community Bankers Association (ICBA), have noted that community banks use deposits to originate approximately 60% of all small business loans and 80% of agricultural loans nationally.[5] This seismic shift threatens fundamental upheaval to economic development.
4. Lack of Community Reinvestment Leads to Regulatory Arbitrage.
Stablecoin issuers should be subject to a similar regulatory regime as banks. The CRA makes it clear that banks which benefit from regulatory safeguards such as federal deposit insurance have an obligation to meet the credit needs of entire communities, meaning that banks cannot solely serve the wealthiest customers. They must serve the needs of LMI households and communities as well through direct lending and financing for community development projects. Similarly, stablecoin issuers should be held to CRA-like standards as they will also rely on a supervisory regime that assures consumers stablecoins are sound ways to store money within their institutions. Safety and soundness measures such as deposit insurance are a form of public subsidy to the banking industry, in exchange for which banks accept obligations to the public interest. The same exchange should apply to stablecoin issuance.
Should deposit flight caused by stablecoins disrupt traditional banking’s ability to invest in community development projects, funding for local affordable housing efforts and small business assistance programs will be significantly diminished. Banks will have less capital to lend and will see their CRA obligations decrease as their assets decline from a drop in deposits. Any stablecoin or market structure legislation should require stablecoin issuers to reinvest a portion of their proceeds into community development projects in underserved communities. This will bring additional capital to needed community development initiatives and would not be difficult from a regulatory perspective as the OCC, FDIC and the Federal Reserve already have established methods for rating the community development performance of banks.
Thank you for considering our views on this important matter. If you have any questions, please contact Kevin Hill, Senior Policy Advisor, at khill@ncrc.org.
Sincerely,
Kevin Hill
Senior Policy Advisor
National Community Reinvestment Coalition
[1] Summary of Dem Priorities on Responsible Financial Innovation Act (RFIA). Published by Politico. Available online at https://www.politico.com/f/?id=0000019b-09c4-d5ec-abbb-d9d64a3b0000
[2] NCRC Comment on Responsible Development of Digital Assets. https://ncrc.org/ncrc-comment-on-responsible-development-of-digital-assets/
[3] Bankrate. https://www.bankrate.com/investing/worlds-largest-stablecoins/
[4] https://home.treasury.gov/system/files/221/TBACCharge2Q22025.pdf
[5] https://www.icba.org/docs/default-source/icba/advocacy-documents/letters-to-congress/icba-letter-to-senate-ahead-of-genius-act-stablecoin-vote.pdf?sfvrsn=600ae317_3/
