The stablecoin-centric GENIUS Act, enacted in July, is expected to significantly shift retail deposits from traditional banks to stablecoin issuers, benefiting consumers. Tushar Jain, Co-founder of Multicoin Capital, expressed that this initiative will challenge banks’ capacity to underpay retail depositors.

“The GENIUS Bill marks the beginning of the end for banks’ ability to rip off their retail depositors with minimal interest.” - Tushar Jain

Translation: “La loi GENIUS marque le début de la fin pour la capacité des banques à exploiter leurs déposants à faible intérêt.”

Jain predicts that major tech firms like Meta, Google, and Apple will soon compete with banks for retail deposits, likely offering better yields through innovative stablecoin services, enhancing user experience.

The act, however, also poses challenges, as traditional banking institutions seek to block what they consider loopholes that allow stablecoins to provide interest or yields via affiliate companies.

Potential Deposit Exodus

Estimates suggest that $6.6 trillion could transition out of traditional banking into stablecoin platforms, leading to a higher risk of deposit flight. Such a migration could consequently elevate interest rates and reduce available credit for consumers.

“This shift will undermine credit creation throughout the economy, resulting in higher interest rates and increased costs for businesses and households,” stated the Bank Policy Institute.

Interest Rates Comparison

In the U.S., savings accounts yield an average of 0.40%, while stablecoin platforms like Tether and Circle’s USDC currently offer up to 4.02% and 3.69%, respectively.

Big Tech’s Stablecoin Aspirations

There’s ongoing speculation surrounding major tech companies exploring stablecoin solutions, which could revolutionize payment processing and financial transactions globally.

The stablecoin market currently holds a valuation of $308.3 billion, dominated by USDT and USDC, and is projected to reach $2 trillion by 2028 as adoption grows.