Stablecoins may compel U.S. banks to offer ‘yield’ to customers, while Russia’s government-supported stablecoin is making a mockery of U.S. economic sanctions.
The U.S. regulatory fight over whether the Senate should use its digital asset market structure legislation to revise the stablecoin-focused GENIUS Act (that’s already law of the land) is nowhere near over, with both banks and crypto operators lobbying fiercely to ensure their preferred outcome prevails.
GENIUS prohibited stablecoin issuers from offering ‘yield’ to token holders, but nothing barred non-issuers like the Coinbase (NASDAQ: COIN) digital asset exchange from offering ‘rewards’ to users of their platforms. Banks are lobbying Congress to close this ‘loophole’ by amending GENIUS via the market structure bill currently being haggled over in the Senate.
Banks (both in America and beyond) fear that these rewards will cause customers to mass-withdraw deposits and buy stablecoins. Crypto operators claim these fears are overblown, although a Treasury Department report from this spring suggested over $6 trillion in deposits could flow out of U.S. banks and credit unions under a worst-case scenario.
Now, a new report by United Kingdom multinational bankers Standard Chartered (LSE: STAN.L) suggests that banks in emerging markets could lose up to $1 trillion by 2028 as customers opt for stablecoins over bank deposits.
U.S. dollar-based stablecoins are already popular in emerging markets due to unstable fiat currencies’ propensity for devaluation as inflation soars. Standard Chartered estimates the sum currently saved in stablecoins by emerging market consumers is around $173 billion, a figure that could rise to $1.22 trillion by 2028.
Egypt, Pakistan, Colombia, Bangladesh, and Sri Lanka are among the emerging markets most vulnerable to this bank-to-stablecoin shift. Other more developed nations like Turkey, India, China, Brazil, Kenya and South Africa could also feel the impact of this transition.
While a trillion dollars is a lot of money, Standard Chartered tried to temper this tempest by noting that the sum represents only ~2% of aggregate deposits in the most vulnerable markets.
Yield or die
In a reply to last week’s X article by blockchain investor Nic Carter on the possible end to the stablecoin duopoly currently held by incumbents (USDT-issuer) Tether and (USDC-issuer) Circle (NASDAQ: CRCL), one prominent stablecoin CEO suggested that all financial institutions holding customer capital will need to hop on the yield/rewards bandwagon if they want to survive.
Patrick Collison, CEO of payment processor Stripe, tweeted a reply to Carter’s article, saying “yes, I think that stablecoin issuers are going to have to share yield with others, but this is just one instance. Everyone is going to have to share yield.” [Emphasis in the original.]
Collison went on to note the 0.4% average interest rate on U.S. savings deposits and the fact that $4 trillion of U.S. bank deposits currently “earn 0% interest. Things aren’t better in the [European Union]: 0.25% average interest on non-corporate deposits; corporate deposits just 0.51%.” (Collison helpfully cited footnotes for these figures.)
Collison noted the full court press by U.S. banks to close the yield/rewards ‘loophole’ before saying: “The business imperative here is clear—cheap deposits are great—but being so consumer hostile feels to me like a losing position.”
Stripe acquired stablecoin-issuing platform Bridge last year and launched its stablecoin-focused Layer-1 network Tempo last month. The latter marked the latest effort by stablecoin issuers (including Tether and Circle) to establish self-controlled networks as the stablecoin payment rails of the future.
Collison’s views were taken one step further by Tushar Jain, managing partner of the crypto-focused venture capital group Multicoin Capital. Jain tweeted that in a post-GENIUS market, he expects “the big tech giants with mega distribution (Meta (NASDAQ: META), Google (NASDAQ: GOOGL), Apple (NASDAQ: AAPL), etc) to start competing with banks for retail deposits.”
Jain said these tech behemoths “will offer stablecoins with better yields and better UX (instant settlement, 24/7 payments, free transfers). These stablecoins will be embedded into the most widely distributed apps and operating systems in the world. Banks are going to have to pay more interest to depositors and their earnings will significantly suffer as a result.”
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European Central Bank issues more stablecoin warnings
Across the pond, Isabel Schnabel, an executive board member of the European Central Bank (ECB), gave a speech in Amsterdam on October 3 with the title “Resisting deregulation: safeguarding bank resilience in an evolving financial landscape.”
Schnabel argued that it is “essential to preserve the resilience banks have built up” in the wake of the 2008 global economic meltdown. While “the sources of financial instability have shifted, banks continue to play a central role in the euro area,” and EU governments should “resist joining a ‘race to the bottom’ when it comes to financial regulation.”
Schnabel included stablecoins among the new risks threatening the financial system. Schnabel acknowledged that stablecoins offer “a cheap and fast way of sending money across borders, bypassing the traditional correspondent banking system,” but in the event of a ‘run’ on stablecoin reserve assets, “spillovers to the rest of the financial system, especially to banks, are likely.”
Stablecoins also “affect the funding structure of banks. If depositors shift into stablecoins backed by bank deposits, stable retail deposits are replaced by more concentrated and potentially more volatile wholesale deposits, increasing the risk of sudden outflows.”
Since the European Union approved its Markets in Crypto-Assets Regulation (MiCA), with its requirements for stablecoin issuers to hold a healthy portion of their cash reserves in EU banks, “large deposits from crypto exchanges and stablecoin issuers with euro area banks have risen notably, from less than €1 billion in 2024 to more than €6 billion by mid-2025.” As such, “financial stability risks from stablecoins are likely to spill over to the traditional banking sector in the event of a crisis.”
This is the latest in a series of recent ECB stablecoin warnings, ranging from president Christine Lagarde accusing stablecoins of “reintroducing old risks through the back door,” to adviser Jürgen Schaaf warning that dollar-denominated stablecoins could weaken the ECB’s control over monetary conditions.
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India’s finance minister says ignore stablecoins at your peril
Europe isn’t alone in acknowledging the stablecoin barbarians at its gates. On October 3, India’s Finance Minister Nirmala Sitharaman addressed the Kautilya Economic Conclave in New Delhi and warned attendees that “efforts to reimagine the global financial system … may force nations to make binary choices: adapt to new monetary architecture, or risk exclusion.”
Sitharaman said “innovations like stablecoins are transforming the landscape of money and capital inflows … Such developments underscore the scale of transformation which is underway. They also remind us that no nation can insulate itself from the system changes. Whether we welcome these shifts or not, we must prepare to engage with them.”
India remains the global leader in digital asset adoption, presenting its government with hard choices. For the time being, India appears content to tax the digital asset sector without going to the bother of imposing comprehensive market structure regulations.
Like its European counterpart, the Reserve Bank of India (RBI) has warned that the rise of dollar-denominated stablecoins could negatively impact national payment systems, including its Unified Payment Interface (UPI) digital network. But for now, the RBI’s only recommendation for the government is to conduct a “close examination” of the stablecoin threat.
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A7A5: let’s get ready to rouble
U.S. President Trump’s signing of the GENIUS Act into law in July has led to bullish forecasts for stablecoin market cap growth, with some estimates ranging as high as $4 billion by 2030 (from the current cap of just $308 billion, up 50% since 2025 began). Standard Chartered’s latest report forecasts the stablecoin cap hitting $2 trillion by the end of 2028, while Citi (NASDAQ: C) analysts suggest this will rise to $4 trillion by 2030.
The vast majority of the current stablecoin market is USD-denominated, a fact stablecoin issuers use to claim their tokens are supporting the dollar’s status as the world’s reserve currency. But Jesse Pollak, head of Coinbase’s Ethereum Layer-2 network Base, told the audience at last week’s Token2049 conference in Singapore that there’s a real need for non-dollar stablecoins to allow local populations “to do everyday things like payments, borrowing and lending in the currency that they’re already used to.”
Also speaking at Token2049 was Oleg Ogienko, director of international development of the ruble-denominated stablecoin A7A5, which trades on the Ethereum and Tron networks. Ogienko claimed A7A5’s market cap was “approaching $500M,” giving it a ~41% share of the total non-dollar stablecoin market. (A7A5’s market cap saw a 250% leap on a single day in late-September, shortly before Ogienko’s Token2049 appearance.)
A7A5, which is officially issued by a Kyrgyzstan company called Old Vector, launched in January with support from a group that includes Promsvyazbank, a Russian state-owned bank under U.S. economic sanctions due to its ties to Russia’s defense industry. Dodging these sanctions appears to have been part of the impetus behind A7A5’s creation, and the token’s trading volume topped $41 billion by July.
On October 3, Reuters reported that it had contacted Token2049 organizers regarding A7A5’s presence at the conference, where the Russian firm served as a ‘platinum sponsor.’ Reuters reported that Token2049’s website appeared to scrub all references to A7A5 shortly after the outlet requested comment from conference organizers (archived website visible here).
The Financial Times subsequently reported that A7A5’s trading volume has now topped $86 billion, more than double the total from July. The source of this figure was Ilan Shor, a Moldovan national who was convicted in 2015 over that country’s 2014 bank fraud scandal but evaded sentencing by fleeing abroad.
The Russia-friendly Shor is behind A7 LLC, a new cross-border payments network in which A7A5 plays a featured role. Customers of Promsvyazbank, which holds a 49% stake in A7, can use the network for exports/imports. Last week, Russia granted A7A5 digital financial asset status, the first digital asset to earn the designation.
A7A5’s meteoric rise hasn’t always been smooth. In August, Washington added both Old Vector and Kyrgyzstan-based exchange Grinex to its sanctions list. Grinex was flagged in a July report by blockchain analysts TRM Labs as “likely a rebranded successor to Garantex,” which was taken down this spring by an international coalition of law enforcement agencies for facilitating Russia’s sanctions dodging. (Grinex has denied ties to Garantex.)
After Grinex was added to the sanctions list, A7A5 administrators burned some $405 million worth of the stablecoins—over 80% of the then-issued supply—held in two Garantex/Grinex-connected digital wallets, then promptly reissued the same amount in a new wallet.
Ogienko didn’t deny that A7A5 was part of the group targeted by the sanctions but claimed A7A5 was compliant with all regulations in Kyrgyzstan and had nothing to do with money laundering.
On October 6, the Centre for Information Resilience (CIR) issued a report saying A7 provided “sanctions evasion as a service,” relying on “a network of foreign shell companies and promissory notes” that make up “a form of trade-based money laundering.”
According to August data, 78% of A7 transactions to date “went through Chinese jurisdictions,” although the company is opening offices in Nigeria and Zimbabwe to expand its African operations.
Ogienko told Reuters that A7A5’s target markets are Asia, Africa, and Latin America, adding that “[t]here are many countries who trade with Russia, and some of them, many of them, use our stablecoin…and these are billions of dollars.”
On Monday, Bloomberg reported seeing documents indicating that the EU was mulling imposing sanctions on A7A5 that would prohibit direct or indirect engagement by EU-based entities in transactions involving A7A5. Sanctions are also reportedly in the works for banks in Russia, Belarus and Central Asia for “enabling crypto-related transactions.” EU sanctions require the support of all EU member states.
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Source: https://coingeek.com/stablecoins-forcing-banks-on-yield-russian-stable-mocks-us-sanctions/