The outlook for crypto finance improved dramatically with the change of administrations and the passage of the GENIUS Act. From January through the end of the “crypto summer of 2025”, outstanding $US stablecoins increased by $80 billion, to a total $280 billion in circulation. The recent surge in stablecoin issuance has caused some market experts to estimate that, by 2030, under base-case assumptions, the volume of outstanding $US stablecoins will reach $1.9 trillion.
Under more bullish assumptions, stablecoins in circulation could reach $4 trillion.
Some argue that the rapid growth of stablecoins portends a repeat of the disintermediation experience that began in the 1970s with the invention of money market mutual fund. The attractive yields offered by these mutual funds attracted billions of dollars of deposits from bank and thrift institutions which contributed to the failure of hundreds of depository institutions during the 1980s.
For example, one Citigroup executive echoes the finding of an April 2025 US Treasury report that estimates that stablecoins have the potential to drain as much as $6.6 trillion in deposits from the banking system. The drain could force banks to raise deposit and loan rates and curtail lending. A more recent Citi Institute report suggests that, by 2030, stablecoin growth could extract up to $1 trillion in domestic bank demand, savings and time deposits.
In my opinion, these forecasts fail to appreciate that the GENIUS Act gives banks the ability to directly compete with non-bank stablecoin issuers. The Act explicitly allows subsidiaries of banks to issue their own payment stablecoins. Banks could supply a hefty portion of the forecasted increase in stablecoin demand without sacrificing their total deposit funding from customer balances in demand, savings, and time accounts.
A bank could issue a stablecoin through a subsidiary, and keep its entire stablecoin reserve balances in demand deposits at its parent bank. The Act explicitly omits a bank’s subsidiary stablecoin reserve balances from bank regulatory capital requirements. In this hypothetical example, the strategy would satisfy stablecoin demand without any impact on the parent bank’s total deposit balances.
Press stories and bank lobbyist press releases link the higher yields offered by fintech firms on stablecoin balances with the potential for bank deposit flight. This interpretation is misguided. GENIUS Act stablecoins are explicitly prohibited from paying interest— regardless of whether the stablecoins are issued by a bank subsidiary or a non-bank authorized fintech.
Once stablecoins are issued, fintech crypto exchanges, wallets and other digital asset custodians accumulate stablecoin balances that can be loaned to fintech firms. The interest on stablecoin loans can be shared in part with the owners of the stablecoins held in custody. The development of a stablecoin banking industry can, in theory, provide the same yield to the owners of bank-subsidiary issued stablecoin deposits as it pays on deposits of non-bank affiliated stablecoins.
While “stablecoin banks” are at present unregulated, as long as the stablecoin bank regulations that are ultimately imposed do not distinguish between bank-subsidiary issued stablecoins and non-bank affiliated stablecoins, there is no reason to anticipate that there will be a yield differential based on whether the issuer of the stablecoins on deposit is bank-affiliated.
The stablecoin industry may currently be dominated by non-bank fintech firms, but it is hard to imagine that stablecoins issued by bank affiliated subsidiaries—especially subsidiaries of globally systemically important banks—would not be highly competitive in the US dollar stablecoin ecosystem. The claim that stablecoins growth poses an existential threat for the supply of banking system deposits presumes that banks, through subsidiaries, will not be competitive stablecoin issuers. Unless bank regulators inject roadblocks that prevent banks from competing as stablecoin issuers, stablecoin growth need not create deposit funding problems for banks willing to compete in the internet-based payments market.
