Why Banks’ Alarm Over Stablecoins Misses the Point
Stablecoins are not a threat to innovation—they expose an outdated banking model.
According to a recent Financial Times report, U.S. banks—including the American Bankers Association, Bank Policy Institute, and Consumer Bankers Association—are urgently lobbying lawmakers to fix what they call a "loophole" in the already contentious GENIUS Act, warning that unrestricted stablecoin yields could trigger up to $6.6 trillion in deposit flight, threatening credit supply and eroding the banks’ traditional funding model. Akila Quinio, U.S. Banks Lobby to Block Stablecoin Interest Over Fear of Deposit Flight, FINNACIAL TIMES (Aug. 25, 2025).
When Ronit Ghose of Citi and PwC’s Sean Viergutz warn that high-yield stablecoins could drain deposits and raise credit costs, they're not defending stability—they’re defending a dying monopolistic structure.
The Banking Panic: $6.6 Trillion at Risk?
The GENIUS Act bars banks from offering yield on stablecoins they issue—but lets crypto exchanges do so indirectly through affiliate structures
Banking bodies like the American Bankers Association (ABA) and Bank Policy Institute (BPI) label this a “loophole” and argue it could prompt $6.6 trillion in deposit flight from traditional banks, undermining credit availability and raising borrowing costs. Adrian Mudzinski, Citi Executive Warns Stablecoin Yields Could Drain Bank Deposits: Report, COINTELEGRAPH (Aug. 25, 2025).
Citi’s Ronit Ghose compares this risk to the 1980s money-market fund exodus, when savers abandoned low-yield checking accounts for better returns elsewhere, severely power-down existing banking models.
PwC’s Sean Viergutz echoes the concern: banks faced with stablecoin competition might need to rely more on wholesale funding or raise deposit rates, ultimately making credit more expensive for families and businesses.
But is this really a systemic risk… or merely the unveiling of an obsolete cost structure?
Time for Banks to Face Reality
1. Banks Have Lost the Battle for Fee Extraction
Stablecoins bypass traditional banking friction—instant settlement, low fees, global reach. If consumers flock to better digital rails, isn’t it because banks charge too much for too little?
2. It’s Not About Risk, It’s About Outdated Products
Banks insist stablecoins threaten credit creation. Yet, stablecoins don’t channel deposits into loans—but maybe it's time banks earn revenue differently, not through artificial interest suppression. For decades, banks have relied on keeping deposit rates artificially low while profiting from the spread, a practice that extracted value from customers rather than delivering it.
3. Competition Drives Innovation—Not Protectionism
Crypto advocates like the Crypto Council for Innovation and Blockchain Association argue that banks are attempting to tilt the playing field, restricting consumer choice and hampering healthy market evolution.
4. Stablecoins Bring Broader Economic Benefits
Stablecoins already:
Lower Treasury yields: BIS research shows strong stablecoin inflows reduce short-term Treasury yields by 2–2.5 basis points—and amplify rate sensitivity during outflows.
Improve payment speeds and reduce friction: for cross-border, B2B, and real-time transactions, stablecoins outperform legacy rails dramatically.
In the end, the banking sector’s fight against stablecoin yields is less about protecting consumers and more about preserving a decades-old model of rent-seeking through fees and suppressed interest rates. Stablecoins offer faster, cheaper, and more transparent money movement—benefits that businesses and households are already demanding. Instead of lobbying to close “loopholes” and slow adoption, banks should focus on reimagining their role in a digital-first economy. The monopoly on payments is gone, and the future will belong to those who innovate, not those who cling to the past.