US Banks and Crypto Firms Clash Over Stablecoin Regulations and Deposits

The regulatory battle over stablecoins in the US has escalated into a fierce competition between traditional banks and cryptocurrency firms for consumer deposits. Initially centered on the legitimacy of stablecoins, the debate now focuses on whether these digital assets should offer interest-like rewards and how they should be classified—either as deposits or under a separate regulatory framework.

Stablecoin supply has surged dramatically, reaching $311.3 billion by January 2026, according to DeFiLlama. This growth has forced policymakers to confront the redistribution of "cash" within the financial system and the shifting balance of power between banks and crypto entities.

Banks argue that stablecoins divert capital from their balance sheets into short-term government bonds, eroding their low-cost deposit base. Yield-bearing stablecoins, in particular, pose a direct threat to traditional banking models, intensifying the struggle for dominance in the evolving financial landscape.