The Battle for Stablecoin Yields: The Escalating Regulatory Clash Between the Crypto Industry and Traditional Banks

【BlockBeats】Recently, a turbulent undercurrent has been sweeping through the financial sector—a heated battle between the crypto industry and traditional banking over the profit-sharing of stablecoins. This dispute has directly impacted the legislative process in the U.S. Congress.

The core issue is quite simple: some leading exchanges offer approximately 3.5% annualized returns on stablecoins. It may not sound like a big deal, but for banks, it’s like undermining their foundation. Why? Because the average interest rate on regular U.S. checking accounts is less than 0.1%, making stablecoin yields over 35 times higher. Even more striking is that these yield-bearing stablecoins do not require the strict deposit regulations that banks must adhere to.

The banking industry has united in opposition. Financial giants like JPMorgan Chase and Citigroup, along with numerous small and medium-sized banks, have submitted letters to Congress warning that these “yield-generating stablecoins” could deal a devastating blow to small and medium-sized banks in the U.S. The Senate Banking Committee’s scheduled vote on the Cryptocurrency Market Structure Bill has been postponed, with this yield dispute being one of the main reasons.

Interestingly, while large banks oppose stablecoin yields, they are also developing their own crypto products. Institutions like Bank of America are even considering issuing their own stablecoins. This shift in attitude reflects the true mindset of financial institutions: it’s not about opposing crypto per se, but about preventing yield mechanisms from stealing their deposits.

Data provides the answer. The U.S. Department of the Treasury has estimated that stablecoins could siphon off up to $6.6 trillion in deposits from the banking system—one of the key reasons being the yield mechanism. To put it into perspective: the total deposits of all commercial banks in the U.S. amount to approximately $18.7 trillion. In other words, the scale of deposit attraction from stablecoin yields could reach about one-third of the entire industry, posing a clear threat to traditional banks.

The policy balance is tipping. The crypto industry’s lobbying efforts in Washington have rapidly strengthened in recent years, but the relationship between traditional banks and Congress has been cultivated over decades, with deeper roots. Recently, a major exchange withdrew its support for the bill, which industry insiders see as a dangerous signal—potentially indicating that the legislation aimed at mainstreaming crypto faces serious challenges.

At its core, this dispute exposes a fundamental contradiction: should we allow innovative yield mechanisms to compete freely, or should we protect the existing financial order? Governments need to find a balance between these two—ensuring financial stability while also leaving room for emerging industries to develop. But for now, that balance has yet to be achieved.