Old banks put the brakes on CLARITY Act, Crypto market infrastructure legislation that will enable the United States to lead the world in digital asset innovation. The biggest obstacle to stablecoin holders’ ability to generate returns remains.
Because payment stablecoins must have low-risk, safe assets such as U.S. Treasury securities under the GENIUS Act, issuers will earn interest on those assets. This means they may have the option to transfer some of this revenue to businesses and consumers who own stablecoins. This makes perfect sense.
On the legacy bank side, they fed an unfounded fear of a “deposit run” and a future in which they would be unable to provide credit to consumers and businesses as money moved out of banks and into stablecoins.
This fear, uncertainty and doubt The (FUD) promoted by legacy banks is unfounded and frankly stupid. Policymakers influenced by the debate also reveal a lack of knowledge and a perspective that is out of touch with reality. Banks, crafty lobbyists and weak-minded politicians need to stop their stubbornness and focus on what is best for consumers, businesses and the country. This means embracing stablecoin yield.
There are many reasons for the fallacy of legacy banks. Below you can find a few of them.
- Banks will be able to compete on equal terms, following exactly the same rules as stablecoin issuers. Meanwhile, many stablecoin issuers are or will become banks anyway.
- There are already many different options for consumers and businesses to keep cash in vehicles that generate far more revenue than many legacy banks offer. And many people are already taking advantage of this reality.
- Consumers are known to be very slow to change their banking relationships. Inertia is awesome. If the stablecoin yield came today, there would be no stampede to escape from a bank with which it has a long-standing relationship.
- Stablecoins can transfer value instantly. Innovators will create a way to earn returns even if legacy banks prevent direct returns by law. Actually it already exists YLDS, a stablecoin-like digital asset that provides returns to its holders.
- What about jurisdictions outside the US? Will they offer stablecoin returns?
- One of the reasons why the administration supports stablecoins is the strengthening of the dollar as the world’s reserve currency. Stablecoin yield could add rocket fuel to this for holders outside the US.
- Legacy banks blocking returns today is a short-term, myopic strategy. It would be more challenging for legacy banks if they chose to compete rather than create a regulatory moat because it would make them more viable in the long run.
- So, does anyone have evidence that there will be a “deposit flight”? No.
- Today, banks can increase deposit returns to become more competitive. Many banks already do this, only systemically important banks like JP Morgan, Wells FargoAnd Bank of America They are deceiving depositors. It’s not about lending, it’s about profit, so banks need to stop whining.
There’s been a lot of talk this week about banks gaining the upper hand in the debate and Coinbase criticizing the current proposal as a non-starter. At the same time, Patrick Witt, Executive Director of President Trump and the President’s Council of Advisers on Digital Assets, issued a statement yesterday, addressing the rumors saying, “There’s a lot of uninformed FUD floating around on social media this week. Everything will be fine. It’s bullish.” Let’s hope he’s right.
Meanwhile, legacy banks have proven out of touch with technology and reality. They need to join the side that is good for consumers and America. Just as politicians who can be so easily deceived by the sky will fall into controversy.
Do you think I’m wrong? Please email me. Did I miss something? Please share.
