Banking Groups Warn That Yield-Bearing Stablecoins Like USDC Could Threaten US Credit System Stability

• Stablecoins are different from bank deposits and money market funds, as they do not fund loans or invest in securities.

• Failure to address this loophole could trigger $6.6 trillion in deposit outflows from traditional banks.

• The stablecoin market is currently valued at $280.2 billion, a small fraction of the US dollar money supply of $22 trillion.

US banking groups warn that allowing yields on stablecoins could disrupt the banking system. Act now to understand the implications.

What is the GENIUS Act?

The GENIUS Act is legislation that prohibits stablecoin issuers from offering interest or yield to token holders. However, it does not explicitly ban crypto exchanges or affiliated businesses from offering such yields, creating potential loopholes.

How could stablecoins affect the banking system?

Banking groups, including the Bank Policy Institute, argue that stablecoins could lead to a significant risk of deposit flight. They emphasize that stablecoins do not operate like traditional bank deposits, which are backed by loans and investments.

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