Legacy banks have lobbied hard and effectively to undermine the future and potential of digital assets. More specifically, the possibility that stablecoins could generate interest for users, thereby challenging the traditional banking model.
As it stands now, stablecoin issuers may not pay users interest on their holdings. As stablecoins must be backed by low-risk/no-risk assets like US Treasuries, stablecoin issuers could potentially incentivize usage by sharing these returns. Today, the interest on a 3-year T-bill is around 3.6%. A one-year T-Bill is slightly lower at 3.48%.
Currently, the national average interest rate on bank savings accounts is around 0.4% APY. The national average for interest-bearing checking accounts is around 0.07% to 0.08%. Banks take these savings and checking accounts and use the funds to loan money to others at an average rate of ~12.19%. It is clear that banks are making a killing off of deposits, while consumers could do significantly better.
While stablecoin issuers may not lend money based on the fiat they receive, they could still support more interest than traditional banks pay their customers. Stablecoin issuers can also save on transaction fees as legacy rails may incur up to 6% in costs, while stablecoin issuers may charge just a few cents. Stablecoins are the future of payments and transfers.
Of course, if policymakers decide to be fair and level the playing field, incentivizing competition rather than protecting a preferred industry, banks could achieve the same business as stablecoin issuers. In fact, they could probably beat stablecoins issuers, if they wanted to, while keeping their lending business intact. So why don’t they do this?
Well, the revenue and earnings generated from deposits are easy money. Lend high, pay low. Some estimates place the possible outflow from deposits at $6 trillion – if all things remain the same. Approximately 30% to 35% of deposits could flee miserly banks. Free money to lend is good for old, inefficient banks, but not so good for consumers.
Bank of America CEO Brian Moynihan expressed his confidence in the power of the bank lobby during their last earnings call, stating they will be fine:
“And so I don’t worry about it. But the point we’ve tried to make, and if you look at some studies, I think, were done by Treasury is that they say you can see upwards of $6 trillion in deposits flow off the liabilities of a banking system to as the deposits into the stablecoin environment. And the key of that is to think that the restrictions to be a stablecoin is basically think of it as a money market mutual fund concept that has to be invested in only deposits, banking Fed or treasuries in short term.
And so when you think about that, that takes lending capacity out of the system. And that is the bigger concern that we’ve all expressed to Congress as they think about this, is that if you move it outside the system, you’ll reduce lending capacity of banks that particularly hurts small-, medium-sized businesses because they’re largely lent to end consumers by the banking industry where capital markets-oriented companies go off into the market. So I think in the end of the day at the margin, the industry gets loaned up.”
Fear, Uncertainty, Doubt
But Moynihan’s response ignores the fact that B of A can acclimate and compete. Banking stasis is not a requirement.
Banks can become issuers of stablecoins and work to keep the business they fear may flee. The banking FUD does not hold water, as Moynihan’s warning envisions the legacy bank ecosystem as needing to be saved from itself by Congressional legislation. It is not about the lending high/returning low business because banks can adapt with new technology. For policymakers falling for the ploy, they need to protect old banks; they simply have it wrong, or they are dishonest.
And it is not as if legacy banks do not already face competition in savings and checking, so the fearmongering simply does not hold water. Today, consumers may choose a litany of options to earn a better return than banking neanderthals, as outlined in the list below:
Savings Accounts
- Varo Bank – 5% (up to $5000)
- AdelFi – 5% (up to $5000, membership required)
- Pibank – 4.6%
- Newtek Bank – 4.3%
- Axos Bank – 4.31% ($1500 in monthly deposits)
- Open Bank – 4.2%
- Bread Savings – 4%
- LendingClub – 4% (monthly deposits of at least $250)
Checking Accounts
- Century Next Bank – 7% ($30,000 balance cap, 12+ debit card transactions a month, minimum $500 ACH)
- Genisys Credit Union – 6.75% ($7500 balance cap, 10+ debit purchases a month)
- La Capitol Federal Credit Union – 6.5% ($10,000 balance cap, 15+ debit purchases a month)
- Credit Union of New Jersey – 6% ($25,000 balance cap, 12+ debit purchases a month)
- Connexus Credit Union – 5% ($25,000 balance cap, 15+ debit purchases a month or $500 spend, $500+ direct depost/ACH)
There are others.
So why don’t the Senators debating the crypto market infrastructure legislation side with the little guy over the big banks? Money. It is the spigot of bank lobby money that has had its intended effect. It has been estimated that total bank lobbying in the US topped a record $3.8 billion in the first nine months of 2025.
While Congressional leaders may be clear-eyed as to what they should do, it is obvious that clarity and common sense collapse when given a choice between getting re-elected or doing what is right for the country.