‘The end of bank’s rip-off’ – Why VC thinks stablecoins will force banks to change

Key Takeaways 

Why is the crypto industry confident of winning against banks? 

Stablecoin rewards are scaling adoption, threatening banks’ deposits. 

How has the stablecoin performed post-GENIUS Act? 

About +$50B has been added, increasing the market size to over $300B, thanks to interest-paying stablecoins. 

The crypto industry isn’t backing down from the multi-billion-dollar stablecoin rewards fight with banks. 

Recently, Coinbase CEO Brian Armstrong slammed the big banks’ aggressive push to ban stablecoin interest as a move to ‘maintain monopoly.’ 

He urged the traditional players to develop better solutions to attract customers, instead of stifling competition. 

The issue has resurfaced as the banking lobby targets the ongoing CLARITY Act discussion to ban stablecoin yield. 

The end of banks’ rip off?

Adding to the crypto voice, Tushar Jain, managing partner at VC Multicoin Capital, said, 

“The Genius Bill is the beginning of the end for banks’ ability to rip off their retail depositors with minimal interest.”

Jain noted that banks will be forced to share more interest with depositors as more tech giants like Meta, Google, and Apple begin offering their stablecoins. 

Currently, most banks offer less than 1% interest for U.S. bank depositors. At the current +5% yield rate, the banks keep most of the accrued interest from Treasury bills. 

Assuming a bank allocates $100B of customer deposits to T-bills for three months, that would be $5.3 billion on a yearly basis at the current 5.3% T-bill yield. Yet, users will get about 0.4 billion as rewards.

The banks keep nearly everything and let users share the breadcrumbs.

In fact, this is exactly Tether’s USDT model in the emerging markets; keeping the billions while helping users avoid inflation and devaluation of local currencies. 

Stablecoin gearing for a win

On the contrary, some stablecoin issuers offer over 4% rewards for deposits, which are shared daily or monthly with holders.

In fact, since the passage of the GENIUS Act in July, stablecoins with rewards have recorded explosive growth. 

In the past month alone, PayPal’s PYUSD has seen a 117% growth in supply to $2.5B. For perspective, in July, the supply was about $800M, implying a +200% or 3X growth in three months. 

PYUSD offers holders about 4% in rewards, payable monthly. Most of the stablecoins offering yield, like BlackRock’s BUIDL and Ethena’s [ENA] USDe, also recorded double-digit growth in the past month.

This underscored the appetite for stablecoin rewards. 

Now, the overall stablecoin sector has surpassed $300 billion for the first time in history, adding over $52B since July. 

Beyond rewards, DeFiance Capital’s Arthur Cheong believes the Singapore bank transfer cap could also drive the adoption of stablecoin.