Circle CEO Slams Banks’ ’Totally Absurd’ Freakout Over Stablecoin Interest Payments
Traditional banks are clutching their pearls over a simple financial innovation—and the CEO of the world's leading stablecoin issuer isn't having it.
The Core Conflict: Yield in a Digital Age
At the heart of the tension lies a fundamental question: who gets to profit from the cash backing digital dollars? Legacy institutions see stablecoin reserves as deposits they should manage—and earn from. Crypto-native firms view that same capital as an asset for their own treasury operations, capable of generating yield through secure, short-term instruments like Treasury bills.
It's a classic turf war, dressed in the language of 'systemic risk' and 'consumer protection.' The old guard warns of shadow banking; the new wave argues they're just optimizing assets in a transparent, on-chain system. The real fear isn't instability—it's disintermediation. Every dollar held in a yield-bearing stablecoin is a dollar not sitting in a low-interest savings account, quietly padding a bank's net interest margin.
A Provocative Defense
The pushback from crypto leadership is blistering. Framing bank concerns as 'totally absurd' isn't just rhetoric—it's a strategic dismissal of a defensive lobby. The argument is straightforward: if the reserves are safe and the yield is passed to users, that's market efficiency, not recklessness. It turns the traditional banking model—where profits from your deposits are kept by the institution—on its head. No wonder it causes heartburn in boardrooms.
This fight is a microcosm of a larger shift. Finance is being rebuilt with embedded yield and programmable rules, leaving legacy intermediaries scrambling to justify their slice of the pie. The cynical take? Banks aren't worried about the 'risk' of stablecoin yield; they're terrified of the 'risk' to their own quarterly earnings. The future of money won't ask for permission—it'll just pay interest.
Circle CEO Rejects Banks’ Stablecoin Fears
Speaking at the World Economic Forum (WEF) in Davos, Circle’s CEO, Jeremy Allaire, discussed banks’ growing concerns that paying interest on stablecoins poses a threat to the industry, calling the deposit flight narrative “totally absurd.”
The banking sector has expressed concerns about stablecoin rewards, arguing that interest payments will distort market dynamics and affect credit creation. In the US, banks have heavily criticized the GENIUS Act, claiming that it has loopholes that could pose risks to the financial system.
The executive rejected the sector’s general arguments, citing historical and practical reasons. He asserted that this exact argument has been historically used when new financial products, such as government money market funds, have emerged.
Notably, Bank of America CEO Brian Moynihan recently compared the digital assets to money market mutual funds, which require reserves to be held in short-term instruments, such as US Treasuries, reducing lending capacity in the system.
The executive told investors that the banking sector, small- and medium-sized businesses in particular, could face significant challenges if the US Congress does not prohibit interest-bearing stablecoins, as up to $6 trillion in deposits, or 30% to 35% of all US commercial bank deposits, could Flow out of the banking system and into the stablecoin sector.
However, Allaire pointed out that, despite institutions claiming that financial products WOULD “draw all the deposit base,” their growth has not “stopped the ability for lending to happen.”
The importance Of Rewards
Circle’s CEO also argued that stablecoins should not be singled out when rewards for other financial products exist and contribute to the system. “Those rewards (…) exist in every balance that you have with a credit card that you use. They exist around so many other financial products and services that we have,” he detailed.
“These rewards are actually very important,” Allaire continued. “They help with stickiness, they help with customer traction. They are not themselves like these huge monetary policy dampers.”
Most importantly, he pointed out that lending is moving away from the risk-taking of banks, with “a huge amount of lending is moving towards private credit.”
He cited a Wednesday WEF panel, in which a capital markets participant highlighted how the vast majority of GDP growth in the United States was “formed by capital market formation around junk bonds.”
“So private credit issuing junk bonds, capitalizing the build out of the American technology advancements, not bank credit,” the executive added.
Previously, Coinbase Institute shared a similar argument, affirming that “credit is evolving, not shrinking. Lending is shifting to private credit, fintech, and DeFi channels that don’t depend on deposits. Liquidity moves—it doesn’t vanish.”
Allaire concluded that “we want stablecoin money to be cash instrument money, prudentially supervised, very, very SAFE money. And then I think what we want to do is we want to build models for lending that build on top of stablecoins.”
