Major U.S. banks are raising alarms about yield-bearing stablecoins, claiming these digital assets could drain deposits and shake the financial system. As of October 2025, with the GENIUS Act in place, these stablecoins offer users real returns, forcing banks to rethink how they compete for customer money.
What Are Yield-Bearing Stablecoins?
Stablecoins have long provided a steady value tied to assets like the U.S. dollar. Now, yield-bearing versions go further by paying interest, often through decentralized finance strategies.
These coins generate yields from activities like lending or staking in blockchain networks. Users earn passive income, sometimes up to 5% or more annually, without the volatility of other cryptocurrencies.
In 2025, popular options include enhanced versions of USDC and DAI, which integrate yield farming. This shift appeals to everyday savers tired of low bank rates.
Market data shows the total supply of yield-bearing stablecoins has surged past $50 billion this year. Investors flock to them for better returns amid high inflation pressures.
Why Banks Are Worried
Banks argue that yield-bearing stablecoins pull money away from traditional deposits. They fear this could limit funds available for loans to businesses and homebuyers.
Lobbying efforts peaked during the GENIUS Act debates in July 2025. Banks pushed to exclude yield features, worried about losing $200 billion in annual revenue from fees and low-yield accounts.
Critics say banks overstate the risks. Past innovations like money market funds in the 1970s faced similar pushback but strengthened the system overall.
Recent reports highlight that stablecoins challenge banks to offer competitive interest. Stripe’s CEO noted last week that this pressure could force banks to share more yields with customers.
Impact on the Banking System
Yield-bearing stablecoins do not spell doom for banks, but they do introduce healthy competition. Customers already move funds to higher-yield options, yet banks adapt by tapping wholesale markets for lending capital.
Data from 2025 shows U.S. bank deposits remain stable at over $18 trillion, despite crypto growth. Stablecoins hold less than 1% of that total, limiting any immediate threat.
However, regional banks feel the pinch more. A recent study estimates that if 10% of deposits shift, smaller lenders could see tighter liquidity.
Banks can respond by innovating. Some now explore tokenized deposits to match stablecoin benefits.
Here is a quick look at how these assets compare:
| Feature | Traditional Stablecoins | Yield-Bearing Stablecoins |
|---|---|---|
| Yield Potential | None | 3-7% annually |
| Risk Level | Low | Moderate (market-dependent) |
| Accessibility | High | High via apps |
| Regulatory Oversight | Growing | Strict under GENIUS Act |
This table shows why users prefer the yield versions for passive income.
Effects on U.S. Competitiveness
Blocking stablecoin innovation risks hurting U.S. leadership in finance. If regulations stifle growth, users turn to foreign issuers like those in Europe under MiCA rules.
The GENIUS Act, passed in July 2025, aims for balanced oversight. It sets federal rules but leaves room for yields, boosting U.S. firms like Coinbase.
Experts warn that overregulation could send jobs and tech abroad. Already, Asian markets see faster stablecoin adoption, challenging U.S. dominance.
On the flip side, embracing these coins could enhance competitiveness. They enable faster, cheaper global payments, aiding U.S. businesses in international trade.
Key benefits include:
- Lower transaction costs for cross-border transfers.
- Increased financial inclusion for unbanked populations.
- New revenue streams for tech-savvy banks.
Future Outlook and Challenges
Looking ahead, yield-bearing stablecoins could reshape finance by 2030. Projections estimate their market cap hitting $1 trillion if adoption continues.
Challenges remain, such as regulatory hurdles and cyber risks. Recent hacks in DeFi highlight the need for stronger security.
Banks must evolve or risk falling behind. Partnerships with crypto platforms offer a path forward, blending traditional stability with blockchain speed.
Consumers gain from this rivalry, enjoying better rates and options. As the landscape shifts, staying informed helps everyone navigate the changes.
What do you think about yield-bearing stablecoins? Share your views in the comments and pass this article along to spark discussions.
