The US banking sector has been spreading misconceptions regarding stablecoin yields in a bid to protect its interests, claims Omid Malekan, a professor at Columbia Business School. He insists that Congress ought to emphasize consumers rather than profit-driven financial institutions.
“I am disappointed that market structure legislation seems to be held up by the stablecoin yield issue. Most of the concerns bouncing around Washington are based on unsubstantiated myths,” Malekan noted in a post on X.
He emphasized that the ongoing discussions about crypto market structure regulation are increasingly influenced by worries regarding whether stablecoin issuers can share their earnings with third-party entities.
The controversy centers around a so-called “yield bottleneck” concerning the distribution of profits from stablecoin reserves, with banks advocating for its closure in fear of losing deposits to stablecoins that offer substantial, risk-free yields.
Malekan argued that the perception that stablecoin growth would lead to a decline in bank deposits is flawed, stating that most stablecoin demand is international. By maintaining reserves in Treasury bills and bank deposits, stablecoins might actually bolster banking activity.
He further argued that competition from stablecoins would not hinder lending but impact bank profits. Institutions can retain customers by raising the interest rates they offer. The current national average is just 0.62%.
In challenging the idea that local banks are especially vulnerable, Malekan referred to larger ‘money center’ banks as the real concern.
“The only reason this myth persists is because it’s pushed by an unholy alliance of large banks trying to protect their profits and crypto startups trying to sell smaller banks their services,” he stated.
Ultimately, he concluded that Congress should place innovation and consumer interests above maintaining the substantial profits of the banking sector.
“Most of the concerns raised by the banking industry on this topic are unproven and unsubstantiated. Congress should continue prioritizing American progress over corporate interests.”
John Deaton, a lawyer and Senate candidate, shared his thoughts on social media, warning followers about pressure from the banking lobby to restrict yield payments on stablecoins.
“The banks are not your friends. And neither are career politicians […] who support them,” he advised.
