As US lawmakers debate crypto market structure, the controversy around yield-bearing stablecoins has become one of the most divisive issues. While the discussion appears focused on crypto, the underlying conflict is far broader, touching the foundations of how deposits work in the US financial system.
At its core, the debate is about who gets paid on consumer balances. For decades, most bank deposits have earned little or no yield for consumers, even though banks actively deploy those funds through lending and investment. In exchange, consumers receive safety and liquidity, while institutions capture most of the economic upside.
Yield-bearing stablecoins challenge this long-standing model by offering users a direct share of returns. This shift threatens banks’ traditional dominance over deposits, which form the backbone of credit creation in the US economy.
Technology is reshaping how people expect money to behave. Increasingly, balances are expected to earn by default, rather than as a special feature for sophisticated investors. Once this expectation spreads, it extends beyond stablecoins to tokenized cash, digital deposits, and tokenized securities.
This explains why the issue feels existential for traditional banking. The question is no longer whether stablecoins should pay yield, but why consumer balances should earn nothing at all.
Critics warn that paying yield could drain deposits and reduce credit availability. However, history shows that credit does not disappear it reorganizes through capital markets and transparent funding structures. The stablecoin yield debate is ultimately a signal of a deeper transition in how deposits, returns, and financial infrastructure are evolving.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.