Banks Raise Concerns About Stablecoin Rewards, Threatening Deposit Outflow

Banking groups are expressing alarm over new legislation that could allow cryptocurrency exchanges to pay yields on stablecoins, potentially leading to a massive exodus of deposits from traditional financial institutions. This concern stems from the potential for exchanges like Coinbase or Binance to reward users for holding USDC or USDT, putting banks at risk and undermining their competitive edge. A Treasury Department estimate suggests as much as $6.6 trillion in deposits could leave traditional banks if stablecoins offer enticing returns.