What Washington’s Crypto Debate Misses About Communities Like Ours
By: State Representative Lydia Hernandez
In Arizona, economic policy is rarely abstract. It shows whether a neighborhood grocery store can expand its cold storage. It shows whether a family-run construction company can finance new equipment. It shows up in whether a first-time entrepreneur gets a chance at extended financing or another rejection letter.
As a state legislator, and as a former Chair of the Latino Caucus, I’ve learned that access to capital is one of the most powerful forces shaping opportunity in our state. It can open doors, or quietly close them. That’s why a loophole in the GENIUS Act, which was passed last summer, deserves far more attention than it’s getting.
The loophole permits crypto companies to offer people high interest-like “rewards” for holding stablecoins, which pushes consumers to move their money out of banks and onto their platforms. While this may sound like innovation or consumer choice, its effects will run much deeper, especially for communities that already face barriers to credit.
Across Arizona, Latino entrepreneurs are starting businesses at some of the fastest rates in the country. They are opening restaurants, landscaping companies, retail shops, trucking firms, and professional services. Yet many of these businesses remain undercapitalized. They rely heavily on community banks and credit unions, institutions that understand local markets, bilingual households, multigenerational finances, and the realities of cash-flow-dependent businesses.
Simply put, those banks depend on deposits to lend.
When deposits are pulled away from banks, for reasons like people chasing high rewards and moving their money into stablecoins, the consequences ripple outward. Lending tightens. Approval standards harden. Interest rates climb. For large corporations, that may be manageable. For small, family-run businesses, it can be devastating.
What concerns me most is how quietly this shift could happen. No factory closes overnight. No headline announces that capital has left a neighborhood. But suddenly a business can’t get a loan to hire more workers. A storefront renovation is postponed indefinitely. A promising idea never leaves the kitchen table.
That’s not innovation. That’s disinvestment.
There is also a question of accountability. Community banks are regulated, examined, and FDIC insured because we expect them to protect consumers and serve the real economy. They are also obligated to reinvest in the community as required by the Community Reinvestment Act. Crypto firms offer deposit-like incentives and are not held to the same standards or tied to CRA obligations. Allowing them to compete for the same dollars without the same obligations tilts the field away from local lenders and toward financial systems that are disconnected from Arizona’s communities.
Arizona’s economy is diverse, dynamic, and deeply local. From Phoenix to Tucson, from Yuma to Flagstaff, small businesses are economic anchors. Policies that drain capital from these ecosystems undermine long-term growth.
As states, we are asked to build inclusive economies. That work becomes harder when federal policy pulls in the opposite direction. That’s why I look to Senator Ruben Gallego to make sure that the consequences of this loophole are part of any upcoming discussions on crypto legislation. Closing this loophole is a necessary step to ensure that Arizona’s small businesses, especially those in Latino communities, are not left competing in a system where the rules were never designed with them in mind.
Our economy is strongest when capital stays connected to people, places, and purpose. That principle should guide every level of policymaking, especially now.
