U.S. Banks Warn Stablecoins Could Drain Trillions in Deposits

TLDR

• Community banks warn stablecoin yields could drain deposits and reshape credit
• Regulators expect gradual shifts and say safeguards and alerts limit shocks
• Crypto firms favor clear reward definitions and activity-based licensing for trust
• Debate centers on deposit competition, loan pricing, and community lending impacts
• Call for rules covering issuers and affiliates to keep oversight consistent

U.S. banks raised new alarms as stablecoin products gained traction and created fresh competition for traditional deposits. They argued that some firms now structure yield features in ways that mimic interest while avoiding federal limits. They insisted that this shift could move funds away from community lending and reshape how credit flows through local markets.

Community Banks Push Congress to Reinforce Stablecoin Rules

Community banks urged lawmakers to tighten rules after they detected yield workarounds that rely on affiliated platforms. They said stablecoin structures still promise benefits that function like interest even when issuers cannot pay interest directly. They argued that this approach undermines the policy goal of keeping deposits available for household and business credit.

Bank groups raised concerns that indirect rewards could weaken deposit levels and pressure smaller institutions. They cited estimates showing that stablecoin growth could place trillions of dollars at risk if customer preferences shift quickly. They warned that this trend could influence banks’ ability to price loans and maintain essential services.

The groups emphasized that affiliated channels should fall under the same restrictions to prevent uneven competition. They noted that regulators designed the existing law to stop interest-like incentives from bypassing lending safeguards. They called for clear language that addresses both issuers and partners to maintain consistent oversight.

Regulators Downplay the Chance of a Rapid Bank Flight

Federal officials responded by stating that large disruptions would unfold slowly and allow time for early action. They explained that monitoring systems already track balance movements and highlight unusual shifts across financial institutions. They added that coordinated responses would activate before significant strain reached critical levels.

Officials reiterated that any rapid migration into stablecoin products remains unlikely under current conditions. They maintained that supervisory tools capture signals well before pressure builds across deposit bases. They indicated that communication between agencies and industry leaders remains active during key developments.

Regulators also said they will adjust guidance as the market matures and introduces new models. They stressed that their role is to preserve system stability while permitting controlled technological progress.  They acknowledged that innovation continues to reshape payment functions and therefore requires ongoing review.

Crypto Sector Argues for Balanced Stablecoin Oversight

Crypto firms countered that restrictive approaches may shift activity toward less transparent venues. They said that stablecoin platforms can still operate safely when they follow strong reserve and reporting standards. They argued that fair competition encourages better products without harming established institutions.

Technology leaders added that clear definitions around rewards and interest would help reduce confusion across financial channels. They stated that uniform requirements could create a level field for both banks and nonbank issuers. They suggested that licensing frameworks based on specific activities would strengthen accountability.

The sector concluded that cooperation between traditional finance and digital firms could support long-term growth. They emphasized that stablecoin adoption reflects demand for simple payment tools and predictable value. They asserted that aligned rules can limit risk while preserving customer choice.

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