Banks vs. Stablecoins

Interest-bearing stablecoins are beginning to pose a real threat to the U.S. banking system. That’s the view of Bank of America CEO Brian Moynihan, who warns that as much as $6 trillion could flow out of banks if customers move their funds into digital assets offering higher yields.

By definition, stablecoins are cryptocurrencies pegged 1:1 to the U.S. dollar. An increasing number of platforms now allow users to earn interest on them—often above 5%. By contrast, many traditional savings accounts still pay less than 1%. Stablecoins also offer faster access to funds and instant, around-the-clock transfers, free from many of the limitations typical of banks.

According to Moynihan, a large-scale withdrawal of deposits could seriously weaken banks’ ability to lend. Loans, mortgages, and credit lines are primarily funded by customer deposits. When those funds shrink, borrowing becomes more expensive, affecting both businesses and households.

Public opinion is divided. Some online commentators argue that banks are simply afraid of competition after years of near-total control over savings and payments. Crypto advocates emphasize that stablecoins provide faster transactions, higher returns, and global access to money.

However, concerns remain. Stablecoins are not regulated in the same way as banks and do not come with deposit insurance. In times of market stress, this could expose users to greater risk.

Much now depends on regulators. U.S. lawmakers are already working on new rules for stablecoins, including standards for issuance and reserve management. Interest-bearing versions may face even stricter oversight. These decisions will determine how far stablecoins can go in competing with banks.

It is increasingly clear that banks fear losing their long-standing monopoly over savings and payments. In response, they have stepped up political lobbying, focusing in particular on changes to the Clarity Act. As reported yesterday, the banking sector has pushed through numerous amendments to the bill, many of which are unfavorable to the crypto market. The scale of these changes was so significant that Coinbase CEO Brian Armstrong withdrew his support for the legislation. This highlights just how intense the conflict of interest has become between traditional banking and the rapidly growing digital asset market.