🧠 Food for thought

Implications, context, and why it matters.

The stablecoin yield debate is a multi-billion dollar fight over a regulatory loophole

• The GENIUS Act bars stablecoin issuers from paying interest or yield, yet it does not clearly ban affiliates or third parties from paying it 1.
• Regulators want to tighten that gap. The Office of the Comptroller of the Currency (OCC), a U.S. bank regulator, proposed a rule that creates a rebuttable presumption that some affiliate or third-party yield plans break the law 2.
• The money involved is large.
• Coinbase reported $1.3 billion in stablecoin revenue last year. It said its USDC rewards program drove growth in 2025 3.
• The Independent Community Bankers of America (ICBA), a trade group for smaller, locally focused U.S. banks, estimated that letting crypto exchanges, affiliates, or other intermediaries pay interest, yield, or rewards on payment stablecoin holdings would cut community bank lending by $850 billion 4.

Stablecoins could shrink bank lending even if they don’t drain deposits

• The public argument often centers on whether stablecoins move deposits out of banks.
• Research argues that even when stablecoin issuers place reserves back into banks, banking still shifts 5.
• Those reserves can cluster into uninsured wholesale deposits. Partner banks may then hold more cash-like assets as a buffer 5.
• A Federal Reserve Bank of New York (New York Fed) study found that banks working with stablecoin issuers had loan-to-asset ratios about 14 percentage points lower than peer banks 6.
• As stablecoins expand, banks may spend more time managing liquidity, which can reduce credit for small businesses and consumers 5.