A recent report discusses the potential risks associated with the rise of stablecoins and their impact on traditional banks. Experts warn of possible mass withdrawals.
Potential Withdrawals from Stablecoins
Ronit Ghose, head of Citi's Future of Finance, compared the potential impact of stablecoins to the money market fund revolution of the late 1970s and early 1980s. At that time, money market assets surged, leading to withdrawals from traditional banks. It is estimated that potential outflows could reach $6.6 trillion. Due to the possibility of higher interest rates on stablecoins, customers may begin to withdraw their funds from banks en masse.
Regulation under the GENIUS Act
Under the GENIUS Act, stablecoin issuers are prohibited from directly offering interest payments. However, this rule does not extend to crypto exchanges and affiliated companies, creating a regulatory gap. Banking organizations such as the Bank Policy Institute have urged regulators to close this 'gap', warning of possible negative consequences for credit flow.
Government Support for Stablecoins
The US government advocates for the use of stablecoins to maintain the dollar's status as a global reserve currency. Treasury Secretary Scott Bessent stated that the administration would leverage stablecoins to preserve the dollar's dominance in international finance.
The discussion regarding stablecoins and their impact on traditional banking highlights the need for careful regulation and understanding of new financial instruments.
