Why Banks Are on High Alert About Stablecoins
By Dylan Tokar and Gina Heeb
Stablecoins are poised to become a part of the mainstream financial system, and banks are on high alert about how the cryptocurrency could threaten their business. The House voted 308-122 Thursday to pass a bill that spells out some ground rules for stablecoins, which function as digital dollars in the wider crypto world. The Genius Act is now headed to President Trump, who has indicated he would sign it. A major issue for banks is whether stablecoin issuers will lure away customer deposits. A Treasury Department report in April estimated that stablecoins could lead to as much as $6.6 trillion in deposit outflows, depending in part on whether issuers could offer yields similar to bank accounts….Those concerns would be especially acute if nonbank stablecoin issuers were to get access to the Federal Reserve system, said Karen Petrou, managing partner of consulting firm Federal Financial Analytics, in a recent memo. The Genius Act doesn’t prohibit access to the Fed by nonbank stablecoin issuers, so it will remain up to Fed officials to determine who gets access. The Fed system gives banks access to extra cash in the event of market stress. The trade-off for banks are costly liquidity requirements, which don’t currently apply to stablecoin issuers. Nonbank stablecoin issuers could sap deposits from banks and simply invest them for their own benefit, rather than use them to help fund loans “that benefit banks, borrowers and the economy as a whole,” Petrou said.