GENIUS Act may drive deposits from banks to stablecoins
- The GENIUS Act, enacted in July, could lead to a $6.6 trillion outflow from traditional banking deposits.
- Stablecoin yields can be significantly higher, with Tether (USDT) and Circle’s USDC offering rates of up to approximately 4% on platforms like Aave.
- The average interest rate for US savings accounts is just 0.40%, compared to yields available from stablecoins.
- The act prohibits stablecoin issuers from directly offering interest but does not ban affiliated exchanges from doing so.
- Big Tech companies are reportedly considering entering the stablecoin market to enhance payment systems and reduce fees.
Concerns arise that the rise of yield-bearing stablecoins could destabilize the traditional banking system by increasing deposit flight risk, especially during economic stress periods.
With potential deposit outflows reaching $6.6 trillion, banks may need to increase interest rates offered to retain customers amidst rising competition from stablecoins.(Source)
