The War Over Crypto ‘Rewards’ is a Distraction. Get Ready for the Age of Stablecoins Now
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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When the GENIUS Act passed last year, it’s fair to say it caught much of the banking industry by surprise. Even though Washington’s sudden love affair with crypto became evident early, the act’s passage hit some like a rocket sled on rails. More recently, industry lobbyists have been scrambling to plug a loophole in the law that many worry will drain deposits from the traditional banking system.
Meanwhile, many bankers are still scratching their heads, trying to figure out what they ought to do with the stablecoin concept, either proactively or defensively.
The stakes are real. Even the Trump Treasury Department, which backed the legislation, acknowledged in a 2025 report pre-dating passage of the law how big the impact could be:
$6.6 trillion in non-interest-bearing banking industry transactional deposits are at risk. That’s about a third of the deposits held by U.S. commercial banks.
The numbers are not theoretical. Accenture’s Top Banking Trends 2026 report points to trends already seen in other countries, such as Argentina. “If this shift scales, it could displace traditional deposits, strain funding and lending capacity and weaken monetary effectiveness.”
Also this from Accenture: “Traditional banks have long profited from the stability of deposits and customers’ reluctance to move funds from low-yield accounts. That model now appears increasingly unsustainable.”
Need to Know:
- Debate continues in Washington over payment of quasi-interest on stablecoin deposits, a point the banking lobby thought it won in the GENIUS Act.
- Meanwhile, organizations like Coinbase continue to promote “awards” on stablecoin “deposits” in their systems: Holdings in USDC stablecoin — “crypto that is held to a higher standard” via the Act — can carry as much as a 3.5% return.
- “Policies that undermine bank and credit union deposits destroy local lending,” wrote a consortium of banking associations in a letter to the Senate.
- The consensus on stablecoin risk is that it will impact commercial deposits sooner than retail deposits. Low-cost business demand deposit accounts have been a core funding source for decades.
- The first incursions will be in international transactions, experts believe, but today adoption curves are steeper than ever.
- Key sources of stablecoin competition already include newly chartered banks like Erebor, with crypto roots, deep expertise and tech industry contacts, and SoFi, a hybrid bank-fintech, with the tech chops to dive in.
An Industry in Flux Over Stablecoins
“So far, what we’ve seen is big banks innovating and community banks advocating, and by advocating, I mean really acting to protect their deposit base,” says Duane Block, managing director, digital assets, at Accenture.
The hinge of industry fate: The next few months hold the key to what will come of stablecoins, as the matter of “interest” is settled one way or another.
“That will reveal whether there’s a real revenue-generating opportunity or whether this will be a defensive paradigm shift,” Block says.
How’d this happen? “If you look at the President’s working group report back at the end of July and then look at the lockstep movement of different regulators in support of those recommendations, the collaboration has been unparalleled,” says Block.
Will loyalty win out? Block says it’s uncertain that money will move out of banking solely because of stablecoins. Local banks have long relied on relationships to survive.
“At the end of the day, people with relationships may or may not respond to just one economic driver,” Block points out.
Read more:
What Should Banks Do Next? Ranking the Options
Beyond the very largest banks, and the new crypto-specialized national trust bank players, many institutions are still wondering what to do about stablecoins.
Chris Dean, CEO of Treasury Prime, which straddles the fintech and banking industries, talks to many banks: “They say, ‘We have to do something right now. It’s very important.’ And I say, ‘Great, what do you want to do?’ And they say, ‘We have to do something right now — it’s very important!'”
They’re stuck. Dean says there are three concrete steps a bank could take:
1. Create your own stablecoin or tokenized deposit. This could be done by individual banks or via one of the consortiums that are springing up. For most, the first option is out of reach. The second is more doable but still challenging.
Dean’s warning: Be aware that below the current political leaders at federal regulatory agencies, career regulators are still all about compliance and safety and soundness. The use of stablecoins for money laundering is key concern.
2. Refocus to become a crypto bank. Nichemanship seems smart, but Dean says this is a very heavy lift when players who are already very plugged into crypto, like Erebor and Cross River Bank, have already jumped in and already know the business.
3. Offer “pay in, pay out” services to your bank’s customers. Colloquially, this means offering customers a bank-based on/off ramp that sends bank deposits into the stablecoin world for payments, and accepts stablecoin payments for re-entry into traditional banking.
The advantage: It keeps the money inside your bank until it has to leave, for payments, anyway. Think of it like operating local roads that lead to interstate highways, and off of them. It’s another option, like wires, ACH and the U.S. instant payments channels, FedNow and The Clearing House Real Time Payments network.
For businesses with international dealings, stablecoin is a helpful mechanism. Tony DeSanctis, senior director at Cornerstone Advisors, says he knows of a firm that swears by PayPal’s stablecoin for buying offshore inventory because it enables recipients to convert to whatever currency they choose.
Duane Block points out that there are other roles banks can play, sometimes with more specialization. One is becoming a stablecoin custodian, for example. He adds that such possibilities will become clearer once Congress completes the second round of stablecoin legislation, currently pending, which is often referred to as the “CLARITY Act” (Digital Asset Market Clarity Legislation for Asset Regulation, Innovation, and Trading Yields Act.)
Read more: 5 Critical Payments Challenges for Banks in 2026. Keep Your Eye on PayPal
Will Retail Customers Go for Stablecoins Over Deposits?
The consensus for now is that stablecoins have more appeal to businesses, for payments, than for consumers. Stablecoins are tailor-made for international transactions, especially to and from markets where local currencies are less stable or reliable. (Stablecoins under GENIUS are supposed to be backed 1 to 1 by U.S. Treasury securities or actual dollars.)
“The volume is there, on the retail side, but it’s really tiny,” says Dean. He finds the idea of paying for lunch with stablecoins at his local taqueria appealing, though he admits that he’s a tech guy.
For consumers, the experiences seen so far are clunky and a little worrisome, says Lily Varon, principal analyst at Forrester. There’s some fear that losing an access code to a “self-custody” stablecoin wallet could render funds unavailable.
In the firm’s annual payments forecast, Forrester predicted that no scalable use case for retail stablecoins would be seen — in 2026, at least.
Also this: “For merchants, processor costs and integration challenges often negate any promised fee savings,” the report added.
“Stablecoins are not going to be an issue for the consumer side,” suspects Michael Abbott, senior managing director and global banking lead at Accenture.
“Consumers will still be keeping their deposits in the bank. Your paychecks are not going to go into stablecoins,” says Abbott. However, stablecoins could become a mechanism making fast movement of funds out of banks easier for optimization of deposits via agentic AI.
One exception is international remittances. DeSanctis sees this use case being added to existing remittance mechanisms. He points out that Western Union announced its U.S. Dollar Payment Token last fall.
One thing our own paranoia would like to see raised to the surface: Is “stablecoin” a route to future bank runs, reminiscent of the so-called “regional bank crisis”?
Read more: How BNY is Banking on Innovation in AI and Digital Assets
