Brian Moynihan, CEO of Bank of America, raised concerns about the potential risks posed by stablecoins in a recent earnings call. He warned that if stablecoin issuers were allowed to pay interest, as much as $6 trillion could be pulled out of the U.S. banking system. The Bank of America CEO’s comments come as the U.S. Senate debates legislation that could change how stablecoins operate.
Moynihan emphasized that under certain regulatory outcomes, stablecoins could draw a substantial amount of funds from U.S. banks. He said that up to $6 trillion in deposits, roughly 30% to 35% of all U.S. commercial bank deposits, could migrate into stablecoin systems. This, he stated, would be driven by the ability of stablecoins to offer higher yields than traditional bank products like savings accounts or checking accounts.
The Bank of America CEO based his estimate on studies from the U.S. Treasury Department. He noted that the ongoing legislative debate over interest-bearing stablecoins could have profound consequences for banks. If stablecoins offer yields, they could draw consumers away from traditional banks, leaving banks with fewer deposits and reducing their lending capacity.
Moynihan compared stablecoin models to money market mutual funds instead of traditional bank deposits. He explained that stablecoin reserves typically stay in short-term instruments like U.S. Treasurys instead of being used for lending. This dynamic could shift the banking system, leaving fewer deposits to fund loans for households and businesses.
Without sufficient deposits, banks may have to seek alternative sources of funding. Moynihan warned that these alternative sources could be more expensive, raising borrowing costs across the economy. He added that small and medium-sized businesses, which rely more heavily on bank credit, could feel the impact most.
The Senate Banking Committee is working on a bill that would regulate stablecoin yields. The most recent draft, released on January 9, includes language that would prohibit digital asset service providers from paying interest on stablecoin balances. This provision aims to limit the risks that stablecoins could pose to the banking system.
While the bill allows rewards for specific actions, such as staking or liquidity provision, it would not permit passive interest payments. Moynihan supported this aspect of the bill, arguing that it would prevent stablecoins from becoming an alternative to traditional banking products. Despite this, some in the crypto industry, including Coinbase CEO Brian Armstrong, have voiced opposition to the bill, claiming it could undermine stablecoin rewards.
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