Banks Intensify Pushback Against Yield-Bearing Stablecoins, Citing Threat to Deposit Business

Yield-bearing stablecoins are expanding rapidly, raising tensions between traditional finance and the crypto industry.

Katana reported on June 7 that banks have begun treating yield-bearing stablecoins as a key competitor that could undermine their deposit business. Lobbying over related rules is also intensifying as the US Congress debates legislation on stablecoins and crypto market structure.

Crypto analyst EGRAG CRYPTO said banks no longer view stablecoins as merely a regulatory issue. Instead, they see them as a threat to their core lending franchise.

Banks pay customers less than 1% on deposits, then use that money to make loans at rates as high as 28%, he said. Stablecoins backed by short-term US Treasuries, by contrast, can offer users yields of about 5% while allowing self-custody and instant global transfers.

Yield-bearing stablecoins have emerged as one of the fastest-growing areas in digital finance. Their use now extends beyond payments into corporate treasury management, cross-border remittances and decentralized finance, or DeFi.

The global stablecoin market now exceeds $320 billion. Tether's USDT remains the largest, with a market value of about $188 billion, followed by Circle's dollar-denominated USDC at roughly $76 billion.

Banks are watching that growth closely. Standard Chartered has estimated that US banks could lose as much as $500 billion in deposits by 2028 if stablecoin adoption accelerates.

The banking industry also strongly opposed provisions allowing stablecoins to pay interest during recent US Senate Banking Committee discussions of the CLARITY Act, Katana reported. Some lawmakers criticized banks for trying to suppress competition from stablecoins in order to protect their low-rate deposit model.