If you lead a community bank or credit union, you’ve likely heard the buzz: issue a stablecoin, tokenize your deposits, or risk being left behind. Yet amid the noise, one question stands out—how can local institutions modernize without draining liquidity or sacrificing their core mission of lending to Main Street?

A new white paper, “Stablecoins and the Future of Lending under the GENIUS Act: From the Perspective of Community Financial Institutions,” offers clear answers. Instead of urging CFIs to jump into issuing digital dollars, it presents a practical roadmap that connects innovation with safety.

The paper follows a single dollar through six GENIUS Act scenarios, each showing how reserve placement reshapes community lending and liquidity. In the early cases, funds flow away from local balance sheets—either parked at large custodial banks, fintech issuers, or the Federal Reserve. The outcome is consistent: tighter liquidity, slower credit growth, and higher funding costs for small businesses and households.

But in later scenarios, a different story emerges. When CFIs engage in GENIUS-compliant stablecoin lending or adopt tokenized deposits, they gain the benefits of faster, more transparent payments without surrendering lending capacity. This approach keeps reserves intact, supports liquidity ratios, and creates new revenue opportunities through digital lending—all while maintaining compliance and consumer protections.

The takeaway is powerful: community institutions don’t need to wait for a “winning” stablecoin or choose sides in the digital dollar race. They can act now—safely—by adopting lending frameworks that fit within the GENIUS Act’s guardrails. These models let CFIs strengthen their balance sheets, lower borrowing costs, and keep credit circulating locally, even as finance transitions onto blockchain rails.

Rather than launching yet another coin, CFIs can leverage what they already do best: relationship-based lending and sound liquidity management. This paper shows how to translate those strengths into the digital age, ensuring that stablecoin adoption doesn’t come at the expense of local economies.
For executives, policymakers, and innovators shaping the next phase of U.S. financial modernization, this paper offers a practical, actionable fix—one that protects community lending while advancing the dollar’s role in the digital economy.