The recent enactment of the GENIUS Act marks a significant turning point in the evolution of cryptocurrency regulation, especially concerning stablecoins. Experts warn that the legislation could accelerate a shift of deposits from traditional banking institutions to high-yield stablecoin platforms, potentially reshaping the landscape of crypto markets and traditional finance. Industry leaders and regulators alike are closely monitoring the implications of this development for the future of banking, DeFi, and crypto regulation.
- •The GENIUS Act, passed in July, aims to restrict stablecoin issuers from paying interest, but loopholes may enable providers to bypass the law via affiliates.
- •Crypto advocates predict this legislation will catalyze an exodus of over $6 trillion from traditional banks into stablecoins offering higher yields.
- •Major tech companies like Meta, Google, and Apple are expected to compete with banks by offering stablecoin-based financial services and higher yields to retail consumers.
- •The decline in bank deposits could lead to higher interest rates, reduced lending, and increased economic strain on Main Street businesses.
- •Stablecoins like USDT and USDC currently offer yields up to 10 times higher than traditional savings accounts, making them an appealing alternative for retail investors.
The stablecoin-focused GENIUS Act, enacted in July, is expected to trigger a significant shift by encouraging depositors to move funds from traditional bank accounts into higher-yield stablecoins, according to industry experts. Tushar Jain, co-founder of Multicoin Capital, highlighted that this legislation marks “the beginning of the end for banks’ ability to rip off their retail depositors with minimal interest.”
Jain predicts that, post‑GENIUS Act, technology giants such as Meta, Google, and Apple will enter the race to attract retail deposits by offering better stablecoin yields, combined with seamless user experience, instant settlement, and 24/7 payment options—advantages banking institutions may struggle to match.
The legislation explicitly prohibits stablecoin issuers from offering interest or yields to token holders but leaves a loophole: it does not explicitly restrict affiliated exchanges and services from doing so, creating potential avenues to circumvent the law. Banking groups have expressed concern that widespread use of yield‑bearing stablecoins could threaten the traditional banking system, which depends on attracting deposits to fund lending activities.
The U.S. Department of the Treasury estimates that mass adoption of stablecoins could lead to approximately $6.6 trillion in deposit outflows from traditional banking, potentially destabilizing credit markets and increasing borrowing costs for consumers and businesses. The Bank Policy Institute warned that such shifts pose risks of deposit flight especially during economic stress, with fewer deposits leading to less credit availability and higher interest rates.
As banks face increasing competition, they will likely be forced to pay higher interest rates to retain deposits—an adjustment that could squeeze their profitability, Jain noted. Meanwhile, stablecoins are offering attractive yields, with USDT and USDC currently providing returns of around 4 % on platforms like Aave, far exceeding the 0.25–0.40 % average savings rates in Europe and the U.S.
Stablecoins: The New Frontier for Higher Yields
With returns potentially up to ten times higher than traditional savings accounts, stablecoins like USDT and USDC are becoming increasingly popular among retail investors seeking better yields in the evolving crypto markets. Patrick Collison, CEO of Stripe, pointed out the stark difference, emphasizing how traditional savings accounts offer minimal interest compared to the lucrative opportunities in DeFi and stablecoin lending platforms.
Major tech firms are reportedly exploring stablecoins to improve cross‑border payments and reduce transaction costs, with some, like Apple and Google, considering issuance strategies to capitalize on this growing market. The current stablecoin market cap stands at $308.3 billion, led by Tether (USDT) and USDC, with the Treasury Department forecasting a surge to $2 trillion by 2028—a 566 % increase.
This rapid growth highlights how cryptocurrencies and stablecoins are increasingly becoming central to the future of digital finance, challenging traditional banking and reshaping the landscape of crypto regulation and DeFi innovation.