Washington’s stablecoin stalemate is hardening right into a struggle that banks acknowledge instantly as a deposit situation.
The dispute is not centered on whether or not dollar-linked tokens ought to exist. It facilities on whether or not they need to be handled as deposits, particularly if customers can earn interest-like rewards merely for holding them.
A latest White Home assembly aimed toward breaking a impasse between banking and crypto commerce teams ended with out settlement, with stablecoin curiosity and rewards nonetheless the central fault line.
The timing will not be incidental. Stablecoins have grown past a distinct segment plumbing layer for crypto buying and selling and cross-venue settlement.
Complete stablecoin provide hit a recent excessive in mid-January, peaking at $311.332 billion, primarily based on DeFiLlama information.
At that scale, the coverage query ceases to be theoretical and turns into a query of the place the most secure, stickiest “money” stability sits within the monetary system and who advantages from it.
Why banks see stablecoins as deposit competitors
Banks care about stablecoins as a result of the dominant mannequin reroutes “deposit-like” cash away from financial institution stability sheets and into short-term US authorities debt.
Deposits are low-cost funding for banks. They assist mortgage books and assist cushion margins. Stablecoin reserves, in contrast, are usually held in money and short-term Treasuries, which shifts the system’s resting cash away from deposit funding and towards sovereign funding.
Basically, these new belongings change who earns, who intermediates, and who controls distribution.
That turns into politically explosive when the product begins competing on yield. If stablecoins are strictly non-interest-bearing, they appear like a settlement software, a funds expertise that competes on velocity, uptime, and availability.
Nevertheless, if stablecoins can ship yield, both immediately or by means of platform rewards that really feel like curiosity, they begin to resemble a financial savings product.
That’s the place banks understand a direct menace to their deposit franchise, notably for regional lenders that rely closely on retail funding.
Normal Chartered just lately quantified the perceived danger, warning that stablecoins may withdraw roughly $500 billion in deposits from US banks by the top of 2028, with regional lenders most uncovered.
The estimate is much less necessary as a forecast than as a sign of how banks and their regulators are modeling the following part.
In that framing, a crypto platform turns into the front-end “money account,” whereas banks get pushed into the background, or lose balances outright.
GENIUS and CLARITY at the moment are tangled within the rewards struggle
Notably, the US already has a stablecoin regulation on the books, and it’s central to the present dispute.
President Donald Trump signed the GENIUS Act in July 2025, framing it as a method to deliver stablecoins inside a regulated perimeter whereas supporting demand for US debt by means of reserve necessities.
Nevertheless, the regulation’s implementation stays forward-dated, with the Treasury Secretary Scott Bessent confirming that the laws may very well be carried out by July this yr.
That runway is one motive the yield dispute has migrated into the market-structure push now grouped below CLARITY.
Banks argue that even when stablecoin issuers are constrained, third events (exchanges, brokerages, fintechs) can nonetheless provide incentives that seem like curiosity, drawing clients away from insured deposits.
As a consequence of this, they’ve outlined a broad prohibition on stablecoin yield, stating that no particular person could present any type of monetary or non-financial consideration to a fee stablecoin holder in reference to the holder’s buy, use, possession, possession, custody, holding, or retention of a fee stablecoin.
They add that any exemptions must be extraordinarily restricted to keep away from undermining the prohibition or driving deposit flight that will undercut Primary Road lending.
Nevertheless, crypto corporations counter that rewards are a aggressive necessity, and that banning them locks in financial institution energy by limiting how new entrants can compete for balances.
The stress has grow to be express sufficient to sluggish legislative momentum.
Final month, Coinbase CEO Brian Armstrong stated the corporate couldn’t assist the invoice in its present kind, citing constraints on stablecoin rewards amongst different points, a transfer that helped delay Senate Banking Committee motion.
Nonetheless, not everybody in crypto agrees that the 2 debates must be fused.
Mike Belshe, BitGo’s CEO, stated each side ought to cease rehashing GENIUS as a result of, in his view, that struggle is settled, and anybody who needs adjustments ought to pursue an modification.
He stated the market-structure effort shouldn’t be held up by a separate dispute over stablecoin yield, including, “Get CLARITY executed.”
That break up is now shaping how the sector plans for 2026. Additionally it is shaping how banks and crypto platforms place themselves for guidelines that may decide who holds the patron’s default greenback stability.
Three paths for the sector, and three completely different units of winners
Contemplating the above, the stablecoin deadlock could be resolved in ways in which reshape enterprise fashions throughout crypto and finance.
Within the first situation, the no-yield clampdown (bank-friendly). If Congress or regulators successfully limit passive “hold-to-earn” rewards, stablecoins will skew towards funds and settlement quite than financial savings.
That may doubtless speed up adoption amongst incumbents in search of stablecoin rails with out deposit competitors.
Notably, Visa’s push is an early sign. It reported greater than $3.5 billion in annualized stablecoin settlement quantity as of Nov. 30, 2025, and expanded USDC settlement to US establishments in December.
On this world, stablecoins develop as a result of they scale back friction and enhance settlement, not as a result of they pay customers to carry.
Within the second situation, banks and crypto corporations can attain a compromise.
Right here, US lawmakers may permit rewards tied to exercise (spending, transfers, card-like interchange) whereas proscribing pure duration-based curiosity.
That may protect shopper incentives however make compliance and disclosures the moat, favoring giant platforms with scale.
The doubtless second-order impact is a migration of yield into wrappers, with returns delivered across the stablecoin by means of constructions comparable to tokenized money-market entry, sweeps, and different merchandise that may be framed as distinct from a fee stablecoin stability.
Lastly, the established order may persist resulting from ongoing delays between the banks and the crypto corporations.
If the deadlock drags by means of 2026, rewards persist lengthy sufficient to normalize stablecoin “money accounts.” That will increase the chance that the deposit-displacement thesis is directionally true, particularly if price differentials are significant to customers.
It additionally will increase the danger of a sharper coverage backlash later, a whiplash second that arrives after distribution has already shifted and the political optics harden round deposit flight.
