Stablecoin Yields Force Banks to Provide Customers Genuine Interest Rates

Stablecoins, which are blockchain-based tokenized versions of fiat currencies, will eventually compel banks and financial institutions to provide yields on deposits in order to stay competitive, remarked Patrick Collison, CEO of Stripe.

The current average interest rate for savings accounts in the US is 0.40%, while in the EU, it’s 0.25%. Collison commented on VC Nic Carter’s X post that highlighted the rise of yield-bearing stablecoins and the sector’s future. Collison added:

“Depositors are going to, and should, earn something closer to a market return on their capital. Some lobbies are currently pushing post-GENIUS to further restrict any kinds of rewards associated with stablecoin deposits.

The business imperative is clear—while cheap deposits are advantageous, adopting a consumer-hostile stance appears to be unsustainable,” he continued.

Since 2023, stablecoins have steadily increased in market capitalization and user adoption, particularly following the introduction of the GENIUS stablecoin bill in the United States. This legislation opened avenues for a regulated stablecoin industry but also banned yield-sharing.

Related: Stablecoin market boom to $300B is ‘rocket fuel’ for crypto rally

Banking Industry fights to limit yield-bearing options for stablecoins

The banking lobby actively opposed interest-bearing stablecoins during discussions by US lawmakers on what to include in the final draft of the GENIUS stablecoin regulation, as reported by American Banker.

Banks, along with their Congressional allies, contended that stablecoins providing interest to clients would jeopardize the banking system and diminish their market share.