A new report from Citi analyzes the potential impact of stablecoins on the US financial system.
Investment Attraction in Stablecoins
According to Ronit Ghose, Citi's head of Future of Finance, the rise of higher-yielding stablecoins could significantly divert capital away from traditional banks. This is likened to the situation in the 1980s when high money market fund rates led to deposit outflows from banks.
Banking Sector Response
Bank representatives, such as Sean Viergutz from PwC, expressed concerns that banks might face increased funding costs, which could make credit more expensive for households and businesses. The discussed GENIUS Act prohibits stablecoin issuers from paying interest but does not close opportunities for exchanges to offer yields.
Crypto Industry Reaction and US Government Positions
Crypto advocates strongly oppose the push for new restrictions, arguing that it would give banks an unfair competitive advantage. Meanwhile, the US government appears to support stablecoin development, viewing it as a means to maintain the dollar's status as the global reserve currency.
The debates surrounding stablecoins and their impact on banks highlight a growing divide between traditional and digital financial systems. The outcome of regulatory discussions could significantly alter the balance in these sectors.
