Banks caution that stablecoins, especially those offering yield, may draw deposits away from traditional banking. However, experts argue there is limited evidence of this happening. Standard Chartered estimates that US bank deposits could decrease by a third of the current stablecoin market cap of $308.15 billion.
US lawmakers are considering banning interest on stablecoin holdings under the proposed CLARITY Act. Banks fear this could lead to accelerated deposit outflows, while critics believe the risk is mostly theoretical.
Policy and finance experts note that stablecoins are mainly used for crypto activities and as a store of value in non-dollar countries. They argue that stablecoins have not significantly drained bank deposits so far.
European regulators view stablecoins in the EU as payment instruments with low consumer engagement. While there are potential financial stability risks with increased stablecoin use, current risks of capital flight in the EU are low.
Proponents of stablecoins argue that banning yield offerings could harm regulated institutions and drive capital migration. CEO of Circle, Jeremy Allaire, believes interest payments on stablecoins do not pose a threat to banks or monetary policy.
Some experts suggest that banks resist stablecoin yields due to competition. China’s central bank allowing interest on digital yuan deposits may give China an advantage over the US in attracting emerging markets.
Read more at Cointelegraph.com
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