Community Banks Are the Central Valley’s Backbone — Congress Must Not Undermine Them

Community banks are a cornerstone of the Central Valley’s economy, particularly for Latino families, small businesses, and agricultural producers who depend on local access to credit. From family farms and food processors to neighborhood restaurants and trucking companies, these institutions provide the financial backbone that allows communities to grow, adapt, and survive economic uncertainty.

Community banks are locally owned and locally invested. Their deposits come from neighbors, workers, and small business owners who trust that their savings will be reinvested close to home. That stable deposit base allows banks to offer operating loans, equipment financing, and long-term capital to businesses that are essential to the Central Valley’s agricultural and food supply chain. When droughts hit, markets fluctuate, or costs rise, community banks are often the first and most reliable line of support.

That stability, however, is now at risk due to a loophole in the GENIUS Act, which regulates stablecoins—digital assets tied to the U.S. dollar or U.S. Treasury securities. While the law appropriately prohibits stablecoin issuers from paying interest, it does not clearly prevent affiliates from offering rewards tied to stablecoin holdings.

This gap in the law opens the door for crypto platforms to market “high-reward” stablecoins that directly compete with community bank deposits, without being subject to the same regulatory safeguards. Stablecoins are not banks. They do not reinvest locally, provide relationship-based lending, or support small businesses through downturns. Yet the U.S. Treasury estimates that this loophole could expose up to $6.6 trillion in potential deposit outflows from regulated banks.

For community banks, deposit losses are not theoretical. Deposits are the foundation of lending. Community banks provide nearly half of all small business loans and most of the farm credit in the U.S. If reward-like incentives draw funds away, as much as $1.3 trillion in community bank deposits could be at risk, resulting in an estimated $850 billion reduction in lending nationwide. In the Central Valley, that would mean fewer operating loans for farmers, delayed equipment purchases, reduced credit for Latino-owned small businesses, and less investment in water efficiency, land improvements, and sustainable agriculture

The consequences would ripple throughout the region. When community banks lose stable funding, farmers and entrepreneurs are pushed toward distant lenders who charge higher rates, impose rigid terms, and lack an understanding of local agricultural realities. That shift weakens family farms, slows job creation, and places added strain on communities already facing housing, labor, and infrastructure challenges.

Community banks finance the projects larger institutions often overlook: irrigation upgrades, cold storage facilities, value-added agriculture, farmworker housing, and small business expansion. They understand the Central Valley’s climate risks, labor needs, and seasonal cash flows. Undermining them undermines the region’s economic resilience.

Congress still has time to act. Senators Adam Schiff and Alex Padilla should press their colleagues on the Senate Banking Committee to close this loophole and ensure stablecoins cannot be marketed with incentives. Innovation and responsible regulation can coexist, but only if policymakers recognize that financial disruptions disproportionately harm rural and Latino communities.

Protecting community banks is not about resisting innovation. It is about preserving access to capital, sustaining small businesses, and ensuring the Central Valley’s agricultural economy remains strong for generations to come.