U.S. Banks Sound Alarm: Multi-Trillion Dollar Exodus to Stablecoins Looms

Wall Street's old guard is sweating bullets as stablecoins threaten to siphon off trillions from traditional banking. The writing's been on the blockchain for years—now the suits are finally reading it.

Why your grandma's savings account might soon be obsolete

While banks peddle 0.01% APY with a straight face, dollar-pegged crypto tokens offer instant settlements and global access. No wonder capital's fleeing like rats from a sinking ship.

The irony? These same institutions that mocked crypto now beg regulators to 'protect financial stability'—banker-speak for maintaining their 3-martini-lunch profit margins.

Banks highlight loophole in stablecoin bill

In a statement released on August 12, the BPI noted that while the GENIUS Act prevents stablecoin issuers from offering direct yields to holders, the law does not address the possibility of crypto exchanges or related firms partnering with issuers to deliver indirect yields.

The group estimated that this could result in a significant transfer of customer deposits out of banks and into digital assets.

The banking coalition warned that such a shift could reduce lending capacity, push interest rates higher, and increase borrowing costs across the economy.

They urged Congress to address the issue, stating:

“Congress must protect the FLOW of credit to American businesses and families and the stability of the most important financial market by closing the stablecoin payment of interest loophole.”

Coinbase and industry push back

Leaders in the digital asset sector quickly challenged the banks’ concerns.

Paul Grewal, Chief Legal Officer at Coinbase, argued that these fears are exaggerated and have already been considered and dismissed by Congress. Grewal stated:

“This was no loophole and you know it. 376 Democrats and Republicans in the House and Senate rejected your unrestrained effort to avoid competition. So did one President.”

Coinbase CEO Brian Armstrong suggested the banks’ position was more about protecting profits than guarding against systemic risk.

Variant Fund CLO Jake Chervinsky echoed this, noting that the banks’ regulatory influence had been rebuffed.

Calls for increased banking competition

Mikko Ohtama, co-founder of Trading Protocol, observed that the traditional banking sector is threatened by the potential for stablecoins to offer more competitive options for savers. He commented:

“The banks need to give more competitive offers for savings accounts and such. This kind of competition WOULD be better for the customers of the banks. It’s a simple process: people won’t move money out of banks if the banks give them a good deal.”