The GENIUS Act, enacted in July, may spark massive deposit outflows from traditional banking as stablecoin issuers compete for retail customers with superior yields, according to Multicoin Capital co‑founder Tushar Jain.
Banking groups attempted to protect profits in August by requesting that regulators close a potential loophole. The legislation prohibits stablecoin issuers from paying interest directly but doesn't explicitly ban yields through affiliated businesses or crypto exchanges.
Jain expects major tech platforms, including Meta, Google and Apple, to compete with banks for retail deposits post‑implementation. These companies could offer better stablecoin yields with improved user experiences for instant settlement and 24/7 payments.
The U.S. Treasury Department estimates a projected $6.6 trillion in potential deposit flight from traditional banking systems in its April analysis. The Bank Policy Institute warned in August that a corresponding credit supply reduction means higher interest rates and increased costs for businesses and households.
Traditional savings accounts offer minimal returns, with U.S. rates averaging 0.40 % and European accounts at 0.25 %, according to Stripe CEO Patrick Collison. Tether's $USDT and Circle's USDC currently yield 4.02 % and 3.69 %, respectively, on Aave's lending platform.
Fortune reported in June that Apple, Google, Airbnb and X were exploring stablecoin issuance to reduce fees and enhance cross‑border payments. No developments have emerged since the initial report.
The stablecoin market sits at $308.3 billion, led by USDT at $177 billion and USDC at $75.2 billion. Treasury Department forecasts predict 566 % growth, reaching $2 trillion by 2028.
Jain stated banks must increase depositor interest payments to remain competitive. Banking earnings will suffer significantly as the GENIUS Act marks the beginning of the end for minimal interest offerings to retail customers, fundamentally reshaping deposit dynamics.