GENIUS Act Targeting Stablecoins Signals the End for Traditional Banks

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The stablecoin-focused GENIUS Act, enacted in July, is expected to trigger a significant shift by encouraging depositors to move funds from traditional bank accounts into higher-yield stablecoins, according to industry experts. Tushar Jain, co-founder of Multicoin Capital, highlighted that this legislation marks “the beginning of the end for banks’ ability to rip off their retail depositors with minimal interest.”

Jain predicts that, post-GENIUS Act, technology giants such as Meta, Google, and Apple will enter the race to attract retail deposits by offering better stablecoin yields, combined with seamless user experience, instant settlement, and 24/7 payment options—advantages banking institutions may struggle to match.

The legislation explicitly prohibits stablecoin issuers from offering interest or yields to token holders but leaves a loophole: it does not explicitly restrict affiliated exchanges and services from doing so, creating potential avenues to circumvent the law. Banking groups have expressed concern that widespread use of yield-bearing stablecoins could threaten the traditional banking system, which depends on attracting deposits to fund lending activities.

The U.S. Department of the Treasury estimates that mass adoption of stablecoins could lead to approximately $6.6 trillion in deposit outflows from traditional banking, potentially destabilizing credit markets and increasing borrowing costs for consumers and businesses. The Bank Policy Institute warned that such shifts pose risks of deposit flight especially during economic stress, with fewer deposits leading to less credit availability and higher interest rates.

As banks face increasing competition, they will likely be forced to pay higher interest rates to retain deposits—an adjustment that could squeeze their profitability, Jain noted. Meanwhile, stablecoins are offering attractive yields, with USDT and USDC currently providing returns of around 4% on platforms like Aave, far exceeding the 0.25–0.40% average savings rates in Europe and the U.S.

Stablecoins: The New Frontier for Higher Yields

With returns potentially up to ten times higher than traditional savings accounts, stablecoins like USDT and USDC are becoming increasingly popular among retail investors seeking better yields in the evolving crypto markets. Patrick Collison, CEO of Stripe, pointed out the stark difference, emphasizing how traditional savings accounts offer minimal interest compared to the lucrative opportunities in DeFi and stablecoin lending platforms.

Major tech firms are reportedly exploring stablecoins to improve cross-border payments and reduce transaction costs, with some, like Apple and Google, considering issuance strategies to capitalize on this growing market. The current stablecoin market cap stands at $308.3 billion, led by Tether (USDT) and USDC, with the Treasury Department forecasting a surge to $2 trillion by 2028—a 566% increase.

This rapid growth highlights how cryptocurrencies and stablecoins are increasingly becoming central to the future of digital finance, challenging traditional banking and reshaping the landscape of crypto regulation and DeFi innovation.

This article was originally published as GENIUS Act Targeting Stablecoins Signals the End for Traditional Banks on Crypto Breaking News – your trusted source for crypto news, Bitcoin news, and blockchain updates.