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GENIUS Act may push retail deposits into stablecoins
The GENIUS Act, a stablecoin-focused bill enacted in July, could prompt a significant migration of retail deposits away from traditional banks into higher-yield stablecoins, according to Multicoin Capital co-founder Tushar Jain. As regulatory clarity around stablecoins increases, retail users may increasingly favor stablecoin solutions that offer better yields, instant settlement and 24/7 payments.
What the GENIUS Act does — and what it doesn't
The legislation explicitly restricts stablecoin issuers from directly paying interest or yields to token holders. However, the law does not clearly prohibit exchanges or affiliated businesses from offering yield-like products linked to stablecoins. That ambiguity creates a potential path for issuers to deliver returns through partners rather than directly — a loophole that banking groups have urged regulators to close.
Why this matters for retail depositors
Traditional savings rates remain minimal — the average US savings account yields around 0.40% and European rates are near 0.25% — while decentralized finance (DeFi) and centralized platforms can offer materially higher returns on stablecoins. For example, borrowing and lending platforms such as Aave currently show USDT yields near 4.02% and USDC yields near 3.69%. Those differentials create a strong incentive for depositors to move funds into stablecoins to capture better returns.
Banking industry concerns and systemic risks
US banking groups warn that rapid, large-scale adoption of yield-bearing stablecoins could undermine the traditional deposit base that funds bank lending. The US Department of the Treasury estimated in April that mass stablecoin adoption might trigger about $6.6 trillion in outflows from the banking system. The Bank Policy Institute has echoed worries that deposit flight during stress periods could reduce credit creation, raise interest costs, and squeeze lending to businesses and households.
How banks might respond
To remain competitive, banks may be forced to increase interest paid to depositors, compressing net interest margins and reducing profitability. Jain expects Big Tech — companies with massive distribution like Meta, Google and Apple — could enter the race for retail deposits by offering stablecoin-based products with attractive yields and seamless user experiences.
Big Tech, stablecoins and market scale
Reports have suggested firms such as Apple, Google, Airbnb and X have evaluated stablecoin initiatives to lower fees and improve cross-border payments. While no large-scale launches have been confirmed, the potential entry of these platforms would add distribution power and legitimacy to stablecoin offers.
The stablecoin market today stands around $308.3 billion, dominated by Tether (USDT at roughly $177 billion) and Circle’s USDC (near $75.2 billion), per CoinGecko data. The Treasury projects this market could grow up to $2 trillion by 2028 — a 566% increase — if current adoption trends continue.
Yields, liquidity and regulatory balance
Higher yields on stablecoins create clear consumer incentives, but they also raise liquidity and regulatory questions. Policymakers must balance innovation and consumer choice with financial stability and the credit needs of the broader economy. Closing legal gaps that permit yields to be offered indirectly will be central to how the market evolves.
Outlook
If the GENIUS Act remains as written, the next 12–36 months could see accelerated experimentation in stablecoin yield products and intensified competition between banks, crypto platforms and possibly Big Tech for retail deposits. For consumers, the result may be access to higher-yield, instant-settlement payment tools. For banks and regulators, the shift will require new strategies to manage liquidity, credit creation and systemic risk.
Source: cointelegraph
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